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NEW YORK (AP) — Specialty retailers may fare well in 2013 as consumer confidence will likely continue to improve, an analyst said Wednesday.
Jefferies analyst Randal Konik said in a client note that healthier housing and job markets are helping to lift consumer confidence and are leading to improving retail and auto sales. While the analyst anticipates consumers will buy when there is a specific reason for a purchase, he believes shoppers will still be focusing on value.
Konik said that Deckers Outdoor Corp. is one of his top picks due to the solid positioning of its Ugg brand and easier gross margin percentage rate comparisons. Nonetheless, shares of Deckers declined $1.91, or 4.7 percent, to $38.36 in midday trading.
Konik also has Gap Inc. as a top pick, saying better merchandise should drive solid revenue results and fewer markdowns. Gap's stock slipped 20 cents to $30.84.
The analyst boosted his rating for Urban Outfitters Inc. to "Hold" from "Underperform," as the retailer is being less promotional and its revenue is improving. The chain's stock climbed 74 cents, or 1.9 percent, to $40.10.
The analyst also lowered ratings for American Eagle Outfitters, Ann Inc. and Skullcandy Inc. Konik cut both American Eagle and Ann to "Hold" from "Buy." The analyst said both companies' stock prices are fair and that there is likely limited upside. Shares of American Eagle declined 64 cents, or 3.1 percent, to $19.87, while Ann's stock dropped $1.27, or 3.8 percent, to $32.57.
Konik reduced Skullycandy to "Underperform" from "Buy" due to increasing competition and a lack of pricing power. The company's shares dropped $1.06, or 13.6 percent, to $6.73 in midday trading.
Retailers will report their December revenue at stores open at least a year results on Thursday. This metric is a key indicator of a retailer's health because it excludes results from stores recently opened or closed. Investors will be keeping a close eye on this monthly figure because it includes the holiday shopping season, which is critical for retailers because it can make up nearly 40 percent of their annual revenue.