The company is known for collaborations with high-end designers, such as Missoni and Jason Wu, that frequently fly off the shelves. In one of its latest coups, Target is teaming with high-end department store Neiman Marcus to launch a collection in time for the crucial holiday season.
Target’s earnings beat follows better-than-expected July retail salesdata that showed broad gains in all 13 components for the first time since 2005. Sales grew 0.8 percent during the month — the biggest jump since February.
Still, Telsey predicts that companies will take a cautious stance on inventory.
“They’re going to play the holiday season for profits given that the sales picture may be more cloudy with an uncertain election coming up and macro challenges out there that are more than we’ve have in the past two years,” she said. (Read More: See CNBC's Full Election Coverage.)
Among other retailers, Telsey added that Coach’s valuation is appealing right now and that the company's margins are good in Japan and its outlet stores.
In addition to Target, McKeever’s other retail picks were Kohl’s, DSW, Family Dollar, and Dollar General.
—Written by CNBC.com's Katie Little; Follow Her on Twitter @katie_little.
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Neither Telsey Advisory Group, nor any of its research analysts have holdings in any securities covered by TAG. TAG analysts do not receive compensation from subject companies. TAG provides investment banking and other noninvestment banking securities related services, and nonsecurities services and may seek such relationships from companies about whom it provides research. TAG, its employees, and their households have no other conflicts or potential conflicts of interest.
Patrick McKeever does not own shares of the companies mentioned in this article.