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Bullish on Back-to-School Stocks

Thursday, 17 Jul 2008 | 3:44 PM ET

Despite consumers cutting back spending, Christine Chen, vice president of equity research at Needham & Company, still feels bullish about the back-to-school retail industry.

“We like the names that have done well in the first half of the year, have the fashion product, and will actually get the consumer to spend their dollars,” she said.

Recommendations:

Aeropostale -– “They have consistently beaten numbers and raised guidance. In a year from now, our price target is $38 -– a 20 percent gain. I think when they report earnings at the end of August or beginning of September, they’ll beat expectations and continue to show that their sales trends are still growing.”

Guess -– “I think a lot of investors miss the fact that they have 30 percent of their business in Europe, and their European business is very strong. They’re at their early stages there and continuing to gain market share there as well as domestically in the U.S.”

Urban Outfitters -– “Nobody else has products like them. Nobody else has stores like them. They are one of few names where estimates will probably continue to go up during the year, because they have the right product and consumers are paying full price for it.”

Smart Money: Retail
Back-to-school retail winners, with Christine Chen, of Needham & Co.

Disclosures:

Chen owns shares in Guess and Urban Outfitters. Needham & Company makes a market in Urban Outfitters.

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