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4 Retail Stocks Downgraded, But 3 Are Best Positioned: Why UBS Has A Bearish View

Published 29/03/2023, 17:01
Updated 29/03/2023, 18:10
© Reuters.  4 Retail Stocks Downgraded, But 3 Are Best Positioned: Why UBS Has A Bearish View

© Reuters. 4 Retail Stocks Downgraded, But 3 Are Best Positioned: Why UBS Has A Bearish View

Benzinga - Analysts at UBS are bearish on several U.S. retail stocks. A predicted consumer spending slowdown will trickle down to the industry’s earnings for the remainder of the year, they said.

Jay Sole downgraded five U.S. retail stocks and lowered 2023 calendar year estimates by 10%. The four stocks downgraded from a Neutral rating to Sell:

  • Ross Stores Inc (NASDAQ: ROST)
  • Burlington Stores Inc (NYSE: BURL)
  • Urban Outfitters, Inc (NASDAQ: URBN)
  • Foot Locker Inc (NYSE: FL)
Sole also downgraded Bath & Body Works Inc (NYSE: BBWI) to Neutral from a Buy rating.

Retail industry calendar year earnings will decrease by 6% year over year, with sales rising 1% while the industry's operating margin deleverages by 70 basis points, UBS forecasts.

Sole’s conviction in his bearish view increased due to deteriorating reads from the UBS Evidence Lab Apparel Consumer Spending Intention Score, coupled with the recent shutter and consolidation of several regional banks.

Further, Sole said that Fed rate hikes will have a more negative impact than previously thought, and not enough bad news has been priced into the market yet.

The market is too focused on potential margin recapture and not focused enough on downside risks to sales, the analyst said.

To many market participants, UBS said a recession significantly weighing on soft good sales is still a bear case. For UBS, it is the base case.

UBS said it prefers the following retail stocks:

  • Nike Inc (NYSE: NKE)
  • Deckers Outdoor Corp (NYSE: DECK)
  • Skechers USA Inc (NYSE: SKX)
Sole said stocks with exposure to athletic footwear, China, and high-income consumers are best positioned.

Image: Pixabay

Latest Ratings for ROST

DateFirmActionFromTo
Mar 2022BarclaysMaintainsOverweight
Mar 2022Morgan StanleyMaintainsOverweight
Mar 2022Deutsche BankMaintainsBuy
View More Analyst Ratings for ROST

View the Latest Analyst Ratings

© 2023 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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