Despite several secular headwinds and the consumer shift to online shopping, brick-and-mortar retailers continue to play a major role in the sector, according to Goldman Sachs.
Analyst Alexandra Walvis initiated coverage of select retailers and outlined the state of the industry in a Monday note.
“After many years of lackluster growth, apparel spending has inflected, driven by a reversal of category deflation," Walvis said in the initiation note. (See the analyst's track record here.)
"This nascent growth is also influenced by leaner inventories, strong consumer spending and more demand for 'fashion'; we expect the better growth outlook to persist in the medium term."
Walvis said she anticipates share shifts between brick-and-mortar stores to drive performance and yield stock opportunities. The analyst outlined four retail stock ideas in the Monday note:
Nordstrom, Inc. (NYSE: JWN): Buy, $73 PT
Nordstrom has invested ahead of the curve and now features a full-price business with strong products, Walvis said, adding that she considers the company well-positioned for growth and returns as investment headwinds dwindle.
Nordstrom shares were up 1.83 percent at $64 at the time of publication Tuesday.
Kohl’s Corp. (NYSE: KSS): Buy, $91 PT
Walvis remains enthusiastic on the company’s long-term traffic initiatives, as well as near-term share opportunities from competitor bankruptcies. These aspects are aided by an off-mall business model and a loyal customer base, she said.
Kohl’s shares were up 1.87 percent at $80.59.
The TJX Companies, Inc. (NYSE: TJX): Buy, $126 PT
TJX is “a long-term secular winner that is well placed to continue to compound revenues and earnings," Walvis said.
TJX Companies shares were up 1.33 percent at $111.43 Tuesday.
Macy’s, Inc. (NYSE: M): Sell, $33 PT
The strategic initiatives at Macy's are insufficient to offset traffic headwinds, Walvis said. This is due to the company’s portfolio of large, mall-based stores and material margin headwinds from investments, she said.
Macy’s shares were down 0.57 percent at $36.34 Tuesday.
“While we believe department stores overall are likely to remain share donors given higher growth opportunities for value and online formats, we view those that offer compelling value or differentiated fashion/curation and have strong balance sheets, smaller boxes and convenient off-mall locations as best-placed to benefit from [the] closures and bankruptcies of competitors,” Walvis said.
The Future Of Retail? Stitch Fix, Blue Apron, Birchbox Provide Innovative Alternatives To Traditional Shopping
Latest Ratings for JWN
|Sep 2018||Goldman Sachs||Initiates Coverage On||Buy|
|Aug 2018||Credit Suisse||Maintains||Neutral||Neutral|
View More Analyst Ratings for JWN
View the Latest Analyst Ratings
See more from Benzinga
- Wedbush Takes Neutral Stance On 4 Major Retailers
- KeyBanc Downgrades Nordstrom, Urban Outfitters, Says E-Commerce Pressures Are Only Increasing
© 2018 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.