Friday, February 15, 2013

StoreIntel Research: Feb 15, 2013

Some comments ahead of President's Day weekend:

  • Ascena Retail Group (ASNA) - We still have reservations about both Lane Bryant and core Dress Barn. Lane bryant is still suffering from a lack of a laser focus on who their plus size demographic is. During multiple store visits during the past 8 weeks, we have been witnessing a true separation from the value perspective which has always been their trademark. Poly chiffon printed tops with an initial retail price of up to $49.99 felt too rich for both the fabrications and styling. The denim assortments, though strong, seemed a bit short of a full bright-color assortment. Having said this, the real issue is whether Lane Brant is a younger or older demographic. With a new president from The Limited coming on board, we will wait and see before we jump on the bandwagon. Coming off a holiday sales decline of minus 9, we don't feel much has changed from this downward trend based on our recent mall walks.

  • Abercrombie & Fitch (ANF) - All hands on deck. We are comfortable from multiple store visits over the last week that both core Abercrombie and Hollister are going to provide upside surprise on the conference call slated for Feb 22. We have been impressed with the traffic, fashion and most of all inventory control throughout the holiday period and into early 2013. Consensus seems to be for slightly positive sales, with concern on the margin side. We are far more bullish on both counts. We feel they are the front runners today in the teen space and are all in on this name. Since we have been touting the name the stock has traded from a low on 12-24 of $45.44 to yesterday’s high of $51.29. Jump on board the ANF train!

  • Chico's (CHS) - A name which StoreIntel has always strongly supported. We have been overly impressed with their assortments at both White House|Black Market and Chicos, but unfortunately nothing is forever. Over the holiday period through last week, we have been concerned with a buildup of inventory at both of these divisions. The stores feel a bit too heavy in the sale department. The complications arrive once some of the new product arrives, which we are less than enthusiastic about, combined with what we feel is too much inventory, which can lead to unwanted markdown pressure and potential gross margin pressure. Ann Taylor reported sluggish sales recently, and we feel this will have a spillover effect for Chico's since the customer demographic is essentially the same. Earnings are scheduled for Feb 28th, so we will provide some more color after the holiday weekend. At this point, we have a red flag up on the Chico's name.

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