Only a few retailers are thawing from an unforgiving holiday season, thanks to hot promotions in January, says Adrianne Shapira, Goldman Sachs' senior retail analyst.
“We're seeing very aggressive promotions right now. Some worked. Names like Kohls and Target that lagged during the holiday season came out more aggressively, and drove better January sales,” she said.
But February is a much bigger deal. January accounts for only about 20 percent of the retail quarter, which Shapira points out is by far smallest month of the holiday shopping season.
“We're expecting Target, Macys, and Kohls to come out hard for Presidents Day weekend,” she said. “That will be more of a tell-tale sign as to how they're faring.”
While they're waiting to see results from Macy's and Kohl's, Goldman has a “buy” rating on Target.
This bullish view on the superstore retailer is based on the current market outlook for the coming quarter, which she's sees as “way too cheap.”
“Target has an opportunity here,” said Shapira. “They're up against a very easy first-quarter comparison of 2 percent; 3 to 4 are likely, especially when you walk away from intense promotions.”
In the U.S., it's all about the cold weather effect. Retailers must capitalize on “pent-up demand” from hibernating consumers before investors weigh in on their fourth-quarter results, she said.
Goldman also has a “buy” rating on Ralph Lauren.
“Ralph Lauren is a winner. We think they've got more category, and geographic opportunites to [increase] margin,” said Shapira. “They've got tremendous, and multiple ways to win.”
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Target is a Goldman Sachs client that received noninvestment, and investment banking services in the last 12 months. Adrianne Shapira does not personally own Macy's, Kohl's, Ralph Lauren, or Target shares.