Retailers Benefit from Competitors Demise, Tighter Controls, Pent Up Demand

• On 2:01 pm EDT, Tuesday September 8, 2009

67 WALL STREET, New York - September 8, 2009 - The Wall Street Transcript has just published its Specialty Retail Report offering a timely review of the sector to serious investors and industry executives. This 57 page feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Consumer Electronics -- Innovation -- Appliance Category -- Housing Market -- Video Games -- Growth of Amazon -- International Growth -- Positives of the Downturn -- Cross-Shopping -- Buying Trends -- Competition in Specialty Retailing -- Department Stores -- Balance in Merchandise -- Underselling -- Promotions -- Informed Customers -- Internet Stores -- Change in the Consumer -- Top-Line Expansion -- Lower Cost Structure -- Teen Consumers -- Back to School -- Stablization -- Consumer Spending Trends -- Shifts in Consumer Shopping Habits -- Comparable Store Sales -- Holiday Expectations -- Retailers Reaction to Shifts in the Economy -- Value

Companies include: Amazon (AMZN); Best Buy (BBY); hhgregg (HHG); Conns (CONN); GameStop (GME); Staples (SPLS); OfficeMax (OMX); Office Depot (ODP); Abercrombie & Fitch (ANF); AnnTaylor Stores (ANN); American Eagle Outfitters (AEO); Buckle (BKE); Chico's FAS (CHS); Bebe Stores (BEBE); Ann Taylor (ANN); Coach (COH); Coldwater Creek (CWTR); Nordstrom (JWN); Dicks Sporting Goods (DKS); Foot Locker (FL); Steve Madden (SHOO); Skechers (SKX); Deckers (DECK); Hibbett (HIBB); Shoe Carnival (SCVL); Target (TGT); Genesco (GCO); Urban Outfitters Inc. (URBN); True Religion Apparel Inc. (TRLG); GUESS? Inc. (GES); Lululemon (LULU); J.Crew (JCG); Hot Topic, (HOTT); Talbots (TLB); Chico's (CHS); Pacific Sunwear (PSUN); Kohl's (KSS); JCPenney (JCP); BJ's Wholesale (BJ); GUESS? (GES); Tween Brands (TWB); Gymboree (GYMB); Mens Wearhouse (MW)

In the following brief excerpt from just one of the 10 interviews in the 57 page report, a retail industry veteran and top rated equity analyst discusses the outlook for the sector and for investors.

Sam Poser is a Vice President and Senior Research Analyst at Sterne, Agee & Leach Inc., which he joined in June 2007. Prior to joining the firm, Mr. Poser spent a short time at FTN Midwest in Cleveland, Ohio, and before that at Mosaic Research in Portland, Ore. Before joining Wall Street, Mr. Poser spent 20 years in retail as a footwear buyer for The Sports Authority, Champs Sports, Track On Trail and Bloomingdales. He has also worked for other retailers, including Macy's California, Neiman Marcus, G Fox, Charivari and Joan & David. Mr. Poser holds a B.A. in political studies from Pitzer College in Claremont, Calif.

TWST: Is it sort of obvious which companies are executing and which are not? Would you speak to the general trends that you see in companies that are executing?

Mr. Poser: Foot Locker is a behemoth meant for the athletic footwear space. They are not the best operators out there. However, we believe they are the most improved operators out there. They also have a lot of low-hanging fruit. So for instance, their inventory levels at the end of Q1 were at the lowest level they were since 2004. Number two, their inventory per square foot, even at that low level, was still about 50% higher on a per-square-foot basis than the inventory at Finish Line (FINL) or Hibbett Sports. That gives them huge opportunities to continue to make themselves more efficient. They made some management changes there at the senior level, people that are very aware of this opportunity. Somebody asked the CEO at the end of Q4 last year, when they comped down 7%, "Couldn't you have done better comps?" And he basically said, "Yes, we sure could have. We could have gotten promotional and then instead of earning 24 cents, we could have earned 19 cents." I mean, the point is, what do you want? Do you want earnings or do you want value? And if you start promoting when you don't have to, the customer gets trained to respond to promotion and that will negatively affect your brand and your profitability for years to come.

TWST: If you take a little longer-term look, do you see growth opportunities in this space?

Mr. Poser: Certainly, because what I think is going to happen is when things get better, you are going to see a huge separation. You are going to see a dramatic separation from those who get it and those who don't. And so you are going to see everybody lift a little and then the good ones are just going to power ahead. It's really about getting focused, understanding this change in the consumer, and managing to that and to the ugly environment that we are in.

TWST: Where are you pointing investors now?

Mr. Poser: The retailers we like the most right now, going into the call, is Dick's Sporting Goods and Foot Locker. On the wholesale side, we'd like Steve Madden (SHOO), Skechers (SKX) and Deckers (DECK). Those would be our top five picks.

TWST: In your mind, are those the companies who've adjusted well? Companies that get it, as you said?

Mr. Poser: Dick's is interesting because they have a lot they can cut and their store growth - which they are holding down - is going to be higher than that this year due to the liquidation of Joe's Sporting Goods out of the Pacific Northwest. They had 31 stores and about $500 in sales. Now, Dick's is already moving in with six stores, and it could be more by the end of the year. And while it doesn't show up in the comp base, it will be materially positive for the fourth-quarter sales numbers, and that could help them. So there's sort of something new going on there.

TWST: That's unusual, I imagine in this environment, to have store growth.

Mr. Poser: They have store growth anyway, but this is a bit above and beyond. That's because they were able to get probably very good deals on stores that were vacant, in an area that really doesn't have a lot of competition. So we expect there to be a lot of pent-up demand in the Pacific Northwest this fall as the stores open.

The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This 57 page special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online .

The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.

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