Analysts Find Gold, Dross in Retail Stocks

What started out as a miserable recitation of quarterly earnings from some of the country’s biggest retailers was saved by a handful of late reports that came in better than expected. The good news is the patient still has a pulse.

Analysts at Gordon Haskett Research Advisors on Friday published a note that included the firm’s take on 10 retail stocks. The note used a “Top 10 Awards” approach based on titles from some hit songs by the Rolling Stones.

Not all the awards are necessarily ones that retailers would be happy to win. Here’s our summary of the awards and the analysts’ ratings and price targets.

Wayfair Inc. (NYSE: W): Reiterated Buy rating and $70 price target
The “I Can’t Get No Satisfaction”, Most Valuable Quarter (MVQ) Award. Post a solid 1Q print, Wayfair leaves us wanting more! To this end, with accelerating sales trends intra-quarter (and into April) along with favorable [Key Performance Indicators] KPI metrics almost across the board, the online player had a breakout print, leading the stock to all-time highs. Importantly, looking ahead, our proprietary email receipt data analysis suggests a continuation of that trend into May, which should translate into another healthy 2Q print.

Macy’s Inc. (NYSE: M): Reiterated Hold rating and $25 price target
The “Paint It Black”, Least Valuable Quarter (LVQ) Award. [Macy’s] set the table for a difficult 1Q EPS season posting a surprising 5.2% [same-store sales] SSS drop. More shocking to us was the lack of meaningful pick-up in sales trends during the March/April period (vs. February) – a concerning development.

Williams-Sonoma Inc. (NYSE: WSM): Reiterated Accumulate rating and $62 price target
The “You Can’t Always Get What You Want” Award. [Williams-Sonoma] reported a very solid 1Q (all five banners improving sequentially on the stacks) following our initiation report (5/8) … Indeed, the [Pottery Barn] division showed some life in the first quarter and WSM’s overall comparable brand guidance of 1-3% appears conservative . . . yet the stock wasn’t able to hold its gains as the bear camp dug in deeper.

Costco Wholesale Corp. (NASDAQ: COST): Reiterated Accumulate rating and $191 price target
The “Gimme Shelter” Award. We continue to view [Costco] as a core holding where investors can feel comfortable taking shelter. … Looking out, with easing core/GAAP SSS compares on the horizon (+ strong May SSS with core comp of ~4.5%) and its offensive/defensive attributes in place, the stock remains a relatively safe play, in our view.

Wal-Mart Stores Inc. (NYSE: WMT): Reiterated Buy rating and $90 price target
The “Start Me Up” Award. “This is not your father’s Wal-Mart anymore”. In fact,following the end of its $6.0 [billion] SG&A investment, WMT is just getting started. … Looking ahead, our proprietary five city/nation-wide monthly pricing work (~200 SKU’s) is revealing steady price cuts by Wal-Mart over the past two months, suggesting the company is finally primed to regain its productivity loop – driving traffic higher in the coming months and see its 2Q SSS guidance of 1.5-2.0% as confidence that the team from Bentonville has momentum in its business.

Target Corp. (NYSE: TGT): Reiterated Sell rating and $48 price target
The “Beast of Burden” Award. The Beast of Burden is the outlaw ballad that captured the mood of the Stones at the end of the 1970’s – in other words, embattled and staring down an uncertain future. …  Our guarded view on the stock centers on the pace at which Target is re-investing in (1) price, (2) in-stores, and (3) digitally to maintain share. All told, while Target’s 1Q print was better-than-expected on the EPS front, our concern on the speed at which Target is moving remains unwavered.

Whole Foods Market Inc. (NASDAQ: WFM): Reiterated Buy rating and $42 price target
The “Time Is On My Side” Award. Whole Foods near-term fundamental outlook took a back seat in 2Q when the company took a number of steps to institute change down in Austin … Recall, our [May 8 coverage] initiation was predicated on the need for change at Whole Foods and with a new Board in place and a change agent in Jana waiting in the wings . . . we believe our patience will ultimately be rewarded ….

Dollar Tree Inc. (NASDAQ: DLTR): Reiterated Buy rating and $98 price target
The “Waiting on a Friend” Award. The core Dollar Tree business had a very sound 1Q with SSS rising 2.5% – accelerating roughly 110 basis points sequentially on the stacks. … Unfortunately, the company’s Family Dollar division posted a negative 1.2% comp with overall EBIT margins dropping ~50 basis points year-over-year to 4.6%.  As a result of the divergence in performance between the two banners and our long-term view that the DLTR management team will fix a non-structurally impaired [Family Dollar] banner, Dollar Tree receives the “Waiting on a Friend” Award for 1Q.

J.C. Penney Co. Inc. (NYSE: JCP): Reiterated Reduce rating and $4.50 price target
The “Play with Fire” Award. As noted in the past, after years of underinvestment/misdirection combined with the missteps surrounding the Ron Johnson experiment, JCPenney has dug itself a big hole.  Said differently, the brand is arguably tired and not resonating with consumers like it did in the 1970’s/1980’s. … Despite this shortfall, the team from Plano kept its FY17 SSS guidance (-1% to +1%) intact … While plausible, we would have preferred a more conservative view ….

Dollar General Inc. (NYSE: DG): Raised to Accumulate and $84 price target
The “Miss You” Award. We’ve long been fans of the team from Goodlettsville, so our former Reduce Rating was an unusual stance for us . . . but one that we felt was appropriate nevertheless. However, after taking into consideration an array of new data points since our 5/8 initiation, including: (1) less than stellar results from Family Dollar (SSS down 1.2% in 1Q); (2) favorable developments from our proprietary traffic survey that showed Dollar General scoring the highest amongst its dollar store peer group (with healthy trends in May); and (3) encouraging results from our five city/200 SKU pricing survey that showed DG holding a 1.2% price advantage over Wal-Mart – putting the company in a position of strength (vs. weakness), we felt a change in view was necessary.

Sponsored: Find a Qualified Financial Advisor

Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you’re ready to be matched with local advisors that can help you achieve your financial goals, get started now.