Citigroup hitting the mall today initiating coverage on the retail sector. The firm calls it "a stormy sector" noting that regardless o fwhich way the macro winds blow, challenges to the group are here to say. Despite the challenges, they believe the consumer is fine…not great, not weak. Who are they recommending you put in your shopping list? Their top three plays right noware: Lululemon, TJX and Tiffany. On Lululemon the company notes it's "seeing great global brand expansion, great category and momentum." Why TJX? Citi writes "it has a winning model with growth and high returns." Finally on Tiffany the firm is excited about the great brand name and the free cash flow calling it "a discount."
Of the twenty names that Citi initiated, two made the sell list: Michael Kors and JC Penney. The firms says Michael Kors' "sales per square foot and EBIT margins have a long way to fall." They prefer Coach for the same EV. On JC Penney, Citi notes the company's "goals seem aggressive."
So, what does our desk think? Pete and Jon Najarian share their plays in the sector.
Pete Najarian: I like TJX Companies at these levels.The retailer provides consistency, has delivered over the past few quarters and its Home Goods business should be a big beneficiary of the continued strength in the housing market.
Jon Najarian: I'm bullish on Best Buy and Ascena Retail. Best Buy is a great consumer discretionary play and is well positioned into the Holiday season. On Ascena, parent company ofLane Bryant and Dressbarn, we've seen some unusual activity and I like where the company is headed.
For more investment advice and real-time analysis watch the "Halftime Report"weekdays at 12 PM Eastern.