In a note to clients this week, Deutsche Bank analysts altered the price target on a number of retailers, stating they expect some second-quarter beats.
The firm told investors that with improving discretionary data points since the first quarter and a more rational promotional environment, particularly in July, they believe second quarter prints "could beat consensus estimates."
Here are the stocks they highlighted:
American Eagle Outfitters (NYSE:AEO): The analysts explained that AEO revenues are anticipated to be approximately flat to last year while operating income is expected to come in above the previous range of $25 million to $35M. "We think sentiment is mixed going into the print as margin drivers of the 2Q beat are unclear," the analysts wrote. They stated that the company's promotional activity improved through the quarter, so they see the majority of the upside to be driven by GPM.
Bath & Body Works Inc. (NYSE:BBWI): Deutsche Bank raised its 2Q EPS forecast for BBWI to $0.37 from $0.34 vs. the Street at $0.34 and guidance of $0.27-$0.32. Overall the investment bank "observed similar levels of promotional activity in 2Q" but believes offers were less promotional in July, "particularly after the Semi-Annual Sale, which leads us to believe there is the potential for GPM upside." Furthermore, they said they believe the company could raise full-year EPS guidance given better than anticipated GPM performance. However, BBWI could remain "somewhat cautious on the top-line due to macro uncertainty."
Kohl's (NYSE:KSS): The firm maintained its above consensus forecast of $0.27 vs. the Street at $0.23 for KSS. Based on Deutsche Bank's checks, the analysts said they saw elevated clearance deals YOY in June, but in July, deals were "roughly in line, while all coupon offers were less deep this year compared to last year." To that end, the firm believes "KSS could report GPM upside."
Lululemon Athletica Inc (NASDAQ:LULU): Finally, Deutsche Banks' LULU forecasts moved up for 2Q, 3Q, and the full year as they see "upside driven by the top-line." The investment bank believes the company could guide third-quarter above Street expectations as they "continue to observe strong traffic" based on their checks.