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Weinswig also noted broadline retail stocks have thus far in 2003 outperformed the market, though the uptick was experienced primarily among high-quality names with higher market capitalizations, such as Wal-Mart, Target Corp. and Kohl’s Corp.
On the flip side, department stores continue to face longer-term obstacles and continue to be in a state of secular decline as the discounters pick up apparel market share.
Price deflation continues to be one of the department stores’ highest hurdles. "Deflation will have the greatest negative impact on the department stores, as the discounters’ superior sourcing capabilities result in the sourcing of higher-quality product at lower prices and continue to increase competition for the moderate customer," said Weinswig.
The Consumer Price Index for apparel has trended down for several years and declined 3.5 percent year-over-year as of March, she noted. "We do not expect apparel deflation to abate, especially as China’s accession to the World Trade Organization approaches in 2005 and China’s share of U.S. apparel imports continues to expand," noted the analyst.