We are now six months from Christmas. While that still gives shoppers plenty of time to make up their minds on what they want to buy, retail executives have to start making up their minds now about what they want to sell.
Stacey Widlitz is the President of SW Retail Advisors. She says “the theme of last year was who promoted most aggressively and early, won. Who will be this year’s early movers? Those are the stocks you want to own.”
Her first bit of advice to retail investors: steer clear of Abercrombie and Fitch because she doesn’t think they’re willing to play the promotion game. Her top pick for the holiday season is The Limited saying “they’re expanding operations and opening a store in London and they’ve been very consistent over the last few years.”
Widlitz also believes JC Penney is a real wildcard this year in the retail sector. She says investors need to watch closely to see how aggressive the company gets on early markdowns. This is CEO Ron Johnson’s first full run-up to the Christmas season after being named to the position late last year. Previously he was part of the brain machine behind Apple’s successful retail strategy.
Widlitz adds it is also key for analysts to start looking at the shape of their inventories. Last year’s unusually warm winter season left many retailers with a full stock of winter clothes and they can’t afford for the same thing to happen this year.
Dana Telsey is the CEO and Chief Research Officer at the Telsey Advisory Group. High on her watch-list this year will be weather. She notes last year was the warmest Black Friday weekend in five years. People just weren’t in the mood to shop for winter clothes.
Other things Telsey says retailers are watching include the unemployment rate and the level of foreign tourism to the U.S. If unemployment goes up sales go down, if tourism to the U.S. picks up, that could be a bright spot.
But because of all the economic uncertainty Telsey says, “we expect inventory levels will be lower, as retailers are dealing with more macro uncertainty and that is leading them to be more cautious. An upcoming challenging political season, volatile tourist flows, an uncertain Europe and Asian business landscape, and a cautious consumer is leading to more careful inventory buys.”
Telsey’s top picks for the holiday season include Michael Kors. She also likes Anne Taylor and Chicos if for no other reason than because Coldwater Creek and Talbots are faring so poorly.
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