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Can Retail Earnings Continue to Improve?

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    Janney Captial retail analyst Adrienne Tennant gives her outlook for retail earnings.

  • Duration 5:21
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And have your drinking a pet.

Well it is a big week right now for retail earnings American Eagle Outfitters and buckles -- fourth quarter reports lifting all of this group.

American Eagle hitting a new 52 week high and -- just a few cents shy of an all time high.

There are more big -- earnings to come.

Arab -- out -- both after the bell today and an incorporated is going to be coming up tomorrow.

After the bell say here's our question cannot run of retail continue Adrian -- is retailing analyst at JD capital.

-- Eric doesn't stop.

They have been on its hair.

This is what I would say I would say that we still have cost inflation pressure in the first half of the year numbers actually for the first quarter actually coming down.

But the setup for the back half.

With cost inflation reversing inventories getting clean the 53 week right which happens once every six years -- -- and a strong fashion trend.

My guess is that we will not see that sell in May that cyclical Fallon -- into the summer that we typically see in the -- -- sector that.

Interesting because we've had some retail analyst good money -- -- that they were concerned about.

Basically that that the -- early spring weather -- cannibalizing on the later spring selling season which is so crucial as you pointed out in your analyst note.

As we get close to Easter -- not worry about that right now.

Well this is what I would say.

On there are people who definitely.

Were out shopping during the February the warmer temperatures definitely played a role in helping February.

What happens now is that most cause it's still are not updated for the colored skinny leg -- and particularly in the teen and young contemporary space.

And I think that most people don't really buy until it gets to be 607080.

Degrees.

At a pretty consistent -- so I actually think that there's another wave of pent up demand and we just happened to half a very good February but I don't think it's over.

OK interesting let's look at some of the stocks that are your coverage universe because a lot of them are reporting this because I mentioned regarding hurt.

From American Eagle the stock is popping right now that that no party coming out strong outlook suck up 3% right now you've got a -- on out when it's really only the but only the few buys that you have out of a whole sector why this name -- you like.

Says this is one of the names that had to -- -- stock right says they have a new CEO on board they had heavy heavy inventory -- a few retailers that would.

Trying to sort of by the comp we always say promote to get the sales left with is very dangerous strategy.

The new CEO got on the call yesterday on he said everything that you want to hear cleaning up the inventory working on sourcing.

You know focusing on -- specific look sue on that is much more accessible and easy to understand.

And all that's gonna start to benefit them in the back half of the year so for that usually there's a couple of quarters two to three quarters.

Before you really have to execute on the strategy.

He's going to be meeting with it's people on the street next week and it and those people have not met him personally.

-- it's going to be another catalyst for shares as people understand the strategy.

Cleaning up the inventory.

And quite frankly they don't necessarily have to execute on until we get further on in the back half of the -- we -- up on Fox Business let's talk to -- -- us about buckle you also we've already heard from this company get.

But -- really done the discounting strategy you point that out.

Other a lot of the other retailers that had to do.

Why buckled do you think that if they don't discount enough that they're gonna have problems coming up.

Now so it's interesting as -- -- a few retailers in the back half holiday season they did not promote and -- historically low levels of promotion.

It was buckle it -- in these it was lululemon.

And that the whole point here is that when you the right product the consumer we'll seek you out and they will pay full price.

Part of the video buckle and CME's.

Is buckle has about 70% of its product branded desirable brands -- -- 85% branded.

They're desirable brands you can pass on price is easier the customer they really want your product using these use mentions in these are coming out after the bell -- what expecting.

I'm expecting them to under the fourth quarter we've we've pretty much the -- -- the fourth quarter by a couple of pennies it's -- a nice solid fourth quarter for them.

And then they started off February with a fourteen point 8% -- Anything above the mid single digit comp flows through to the bottom line at a 25 to 30% for -- margin so.

There off to a great start they actually setting their spring later I would expected to guided by the street for Q1 of it would you change your rating did you -- to neutral on -- right now which change really entering.

You know.

I did they do have a neutral on it it has more to do is -- the valuation.

But yet it does seem like this market is sort of looking through valuations and just looking for good solid story you've also credited strong Ann Taylor I do wanna ask you about that one that's also another -- report that we're gonna be getting this week.

Again for that company what are you looking forward expect.

It it you can't I think as a rising tide it's going on in the entire space there is a warmer spring we have not heard about -- February comp for them.

The loss -- that this continues to do very well high single low double digit comps for them so I would suspect.

That.

As -- most of the retailers that they're gonna have some pretty good things to say tomorrow.

-- Adrian -- -- title holder has been have been on quite -- -- even coached some of the big names hitting all time highs even today so there's a lot to watch there Adrian tenant retail analyst at Janie.

Capital markets Adrian thank you.

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