Retail Ends the Week with Highs and Lows
Mary is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Results were mixed for retailers at the end of the week. Quiksilver, Inc (NYSE: ZQK), Urban Outfitters Inc (NASDAQ: URBN), Under Armour Inc (NYSE: UA), and Target Corporation (NYSE: TGT) all ended the week with ratings upgrades from analysts. However, not all retailers were so lucky. Lululemon Athletica Inc (NASDAQ: LULU), Finish Line Inc (NASDAQ: FINL), and Walgreen Company (NYSE: WAG) all ended the week on a sour note with downgrades from analysts.
Quiksilver was upgraded to a buy from a neutral by Goldman Sachs. This comes directly upon the heels of the company’s appointment of a new CEO. Former Disney executive Andy Mooney will now be leading the brand, lending more credibility to the company from a business perspective. Optimism is high that Mooney can pull the brand forward. Urban Outfitters and Under Armour were upgraded to outperform from neutral by analysts at Credit Suisse. There could be many reasons for these upgrades. Both Urban Outfitters and Under Armour are strong brands with a following in their respective niches. However, both do also have strong competitors. So the key for these two brands is in retaining current customers while at the same time reaching new ones. Target was raised to a buy from a neutral by analysts at Capital Markets. Even though their holiday sales were less than what the company had desired the analysts still see potential in the coming year.
Analysts at Credit Suisse also cut Lululemon’s rating to neutral from outperform. This downgrade resulted in the stock falling 5.3%. There is talk that some of the brand’s new products may have missed the mark with consumers. In a brand that many consumers look to for stability that could be disheartening. The company experienced a fairly quick growth spurt in the marketplace. Perhaps that is now catching up to them. Lululemon was not the only retailer to fall at the end of the week. Finish Line also fell short of expectations, falling 3.5% after their earnings results and outlooks missed expectations. The shoe retailer just wasn’t able to make the sales it needed in the fourth quarter. It would seem not everyone had a happy holiday season. Walgreens joined them as their December same-store sales fell more than expected. The drugstore has been making changes recently that are apparently not paying off. They recently acquired rival USA Drug and also started their own loyalty card program. However, these changes were not enough to keep them from faltering.
Retail is indeed a tough business as consumer moods and preferences change almost without warning. Keeping up with consumers and maintaining brand loyalty and awareness is tough business. However, as those such as Urban Outfitters and Target have proven, the task is not altogether impossible. Walgreens, Lululemon, and Finish Line need to tighten up their business models if they wish to stay competitive this year.
MaryPosey has no positions in the stocks mentioned above. The Motley Fool owns shares of Under Armour. Motley Fool newsletter services recommend Lululemon Athletica and Under Armour. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!