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Retail rally rips higher – five experts weigh in on what's next

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Retail stocks are on the rise —Watch five experts break down the sector's winners and losers

Retail has had a rip-roaring week.

Better-than-expected earnings from Nordstrom, Home Depot, Lowe's and Target have set the retail space ablaze, and soothed any concerns over the strength of the consumer. The XRT retail ETF is up 4% since Monday, nearly quadruple the gains of the S&P 500.

Five experts weigh in on what comes next for big-winner Nordstrom and the rest of the group.

Oliver Chen, senior retail analyst at Cowen, said the top retailers are betting on the future.

"Who are the winners in this environment? Walmart, Target, Costco. The future of retail is a lot about service and Nordstrom Local helps you return items quickly and really leverages inventory in a very local way close to your home. So that is something to be watching and that's a brighter spot at Nordstrom."

UBS retail analyst Jay Sole said this Nordstrom rally might not have legs.

"Nordstrom is a great retailer but they've been going through some challenges and I think the reason the stock is up is they've done a great job of controlling expenses, and also controlling inventory. And so, you know, the market's been very skeptical so we're seeing a nice little rebound here but it might take a little bit longer for that sales trend to turn around. That's why we really don't think there's a lot of upside from this point, you know where we're at today."

Jharonne Martis, director of consumer research at Refinitiv, said certain retailers can hold up well in a slowdown.

"When we look at our research at Refinitiv, it's very evident that Walmart and Target are very well positioned and so are other retailers as well and these names include companies that are offering the consumer value and convenience and have consistently done well in times of an economic slowdown and also when the consumer has been engaged. These are Walmart, Target, Home Depot, Lowes, Ulta, Sephora ... and we look at these companies because they have been able to grow in a time when a lot of retailers have been closing their doors. Walmart and Target continue to open, to expand their footprint and continue to attract more brands."

Dana Telsey, CEO at Telsey Advisory Group, said this Nordstrom pop is overdue after getting washed out.

"The big change in Nordstrom is the fact that the inventory levels came in clean, down 6.5%. And on the earnings guidance, while they adjusted the earnings guidance they still stayed within the range. So I think that's what happened, their anniversary sale was softer than expected, the sales came in at the low end of the range and could it be that some of these stocks just got so overdone that the fact that they were as overdone, any little news that looked inline even slightly better, there you go, the stock moves higher."

Stifel Nicolaus analyst Mark Astrachan sees strong consumer spending continuing.

"Frankly, we think the consumer is healthy. Our survey that we put out every month or so that has about 600 consumer surveys shows that it's a pretty consistently healthy U.S. consumer spending environment. We look at spending intentions on a go-forward basis and not only overall but amongst the largest retailers — Walmart, Target Costco. Even inclusive of Amazon, the consumer wants to spend and so despite the volatility that you see in the macro environment, it doesn't seem to be having an impact so far. Obviously, nobody can see what's going to happen in the future and the retailers are all talking about some sort of caution on the future and tariff impacts but what we can see so far, the consumer is quite healthy."

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