Most Recent Articles In Fashion Features
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The year started out last week with a stock rally that saw the overall market rise more than 3 percent with retail issues close behind. "If there was some really great fashion trend, I would say these stocks are cheap," Pierce noted. "I’m nervous because last year there was such a compelling reason to buy." While the bohemian look last year drove sales, this season has yet to produce a follow-up.
Lazard Freres & Co. analyst Todd Slater said retail shares should finish 2003 above where they started, but wouldn’t follow a straight line and would be marked by underperformance in the first half and overperformance in the second. He expects stocks will be "unable to break out of a range until easier comparisons in the back half."
The bar isn’t set very high for 2003, since last year was, as Slater described it, "the gloomiest year for retail stocks in a long time. As we approached the end of 2002, the disparity between the strong retailers and the secondary and tertiary retailers widened," he noted. "The spread will become more clear when fourth-quarter earnings are reported."
Goldman, Sachs specialty retail analyst Thomas Filandro noted that investors generally recoil from retail issues in the autumn with the back-to-school and holiday seasons creating uncertainty. Usually, he said, Christmas works itself out sooner or later and investors come back to retail after New Year’s.
Spirit was lacking this past holiday season, however, and that’s going to contribute to "a very squirrely spring season for these stocks," said Filandro, who expects comparable-store sales trends to be decisive in determining retail stock performance.
Investors, he said, should be on the lookout for down-and-out value plays and growth opportunities, which are fewer and farther in between.
Even as the prospect of improving conditions exists, 2002 proved that sometimes it was better to be struggling back into growth mode than on top of the heap in the minds of investors.