Consumer discretionary stocks surged in the first half of 2009, and retail analysts Kimberly Greenberger of Citi, and Charles Grom of JPMorgan, discussed what's in store for the sector in the second half of the year.
“Consumers are still shell-shocked and we’re going to see a trade down for quite some time,” Grom told CNBC. “Value is going to become the new vogue and so we need to stick to the barbell approach.”
Grom had a positive outlook for the retail sector, and said “sticking with retailers with positive traffic should allow some sales per square foot expansion over the next 3 to 4 years.”
He advised investors to stick to the defensive names but also have a little bit of beta in their portfolios.
Greenberger said investors should start buying consumer discretionary names during the late contraction phase of a recession as well as when the economy starts to show signs of a rebound.
“We do not think that a very large topline growth is coming back anytime soon, but inventories were so out of control among many retail companies that a way to make profit right now is by cutting inventories,” she said.
American Eagle Outfitters
Grom has investment banking clients who own shares of Kohl’s, Dollar Store, BJ’s and Wal-Mart.
Greenberger’s company or an affiliate received compensation for products and services other than investment banking from Urban Outfitters and American Eagle Outfitters in the past 12 months. A suit file by American Eagle Outfitters against Citigroup is currently pending in federal court.