With former U.S. retail stalwarts like J.C. Penney Company (JCP) and Sears Holdings Corp (SHLD) seemingly on the brink of death, it goes without saying that the U.S. retail sector has been difficult to navigate for investors over the last few years. According to Goldman Sachs analyst Alexandra Walvis, the difficulty will continue in coming years. Walvis is generally bullish on the U.S. apparel industry but says it is critical for long-term investors to be selective when choosing stocks. Walvis recently initiated coverage on the group. Here’s her take on a handful of popular stocks.
Nordstrom-Buy
Nordstrom, Inc. (JWN) was aggressive in investing to update its stores and business model in recent years, and Walvis says those efforts are paying off in terms of store experience, luxury-oriented product lines, high online penetration rates and top-tier omnichannel services. Nordstrom has also differentiated itself from other U.S. retailers by offering high-end brands. Walvis says Nordstrom should exceed consensus earnings estimates by 2 percent in fiscal 2018 and 7 percent in fiscal 2019 on the strength of better-than-expected same-store sales growth and margins. Goldman Sachs has a “buy” rating and $73 price target for JWN stock.
2. Tapestry-Buy
Tapestry, Inc. (TPR) is the company formed from the 2017 merger of Coach, Kate Spade and Stuart Weitzman. Walvis says Tapestry is an attractive value stock with a favorable risk-reward balance and growth opportunities for long-term investors. While Stuart Weitzman remains a challenge in the near-term, Walvis says the valuable Coach brand is performing very well, and Kate Spade could soon see an uptick in growth. In addition, Walvis says Tapestry could also be on the lookout for additional brand acquisitions. Goldman Sachs has a “buy’ rating and $56 price target for TPR stock.
3. Kohl’s-Buy
Walvis says Kohl’s Corporation (KSS) is well positioned in both the near-term and the long-term. Over the next several months, Kohl’s should see upside to its same-store sales numbers given the shrinking U.S. footprint of competitor Bon-Ton, which plans to close 40 stores in 2018 and has another 20 stores on its closure “watch list.” In the longer-term, a partnership with Amazon.com (AMZN), an improving brand mix, and an initiative to sub-let store space to high-traffic partners are all key drivers for Kohl’s. Goldman Sachs has a “buy” rating and $91 price target for KSS stock.
4. Macy’s-Sell
Despite a generally bullish outlook for apparel retailers, Walvis says…
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