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What are the Retail Stocks for Investors to Watch?

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    Macquarie Capital Senior Analyst Liz Dunn on the outlook for the retail sector.

  • Duration 3:45
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On some of these names in your portfolio will report same store sales numbers on Thursday the sector is expecting to grow about one point 2%.

Liz Dunn -- consumer analyst from Macquarie capital joining me now with the retail picks and -- -- first.

Do you agree with that number of growth or do think it'll be less or more.

I think the month will be disappointing I don't come up with an aggregate number but the numbers I've seen.

-- subject -- suggests that there will be a weaker rate of growth and we've seen year to date.

Is that is that psychological concerns about what's happening with the economy is that Europe weighing on americans' wallets.

I think there a couple of things going on the high -- seems to be slowing down after two.

Really strong years -- outperformance what's going on there is really I think that the high end consumer.

Is watching the financial markets they have a a significant amount of their wealth tied up in the financial markets and that that volatility is impacting them I also think that the high end.

Retailers.

Are exposed to European tourist shopping.

And that's slowed down so I think that's what's happening at high end.

For more moderate and come our food retailers focused on more moderate income consumers the story there is jobs you.

Highlighted the weak manufacturing data just on the last segment and I think that jobs have have slowed.

Jobs of slowed well a job growth certainly is slowing down were waiting for the jobs number on Friday for the month of June but before that let's get to how you perceive some of these names and this justice were actually in.

July beginning of July starting to see back to school promotions already.

What's behind the psychology there.

I think there was a pull forward of demand into the first quarter of the first quarter you remember was so warm and so I think that pulled forward some seasonal demand.

Retailers right our left without much says -- To offer that the consumer rights if you bought your sandals in your shorts in the first quarter there's nothing site in the second quarter so I think that many retailers are focused on fall.

But it's just it's too early we've seen back to school get pushed further and further back into August in the previous years and I think that that trend will continue this year.

Who has sizzle and steak right now let's pick three of your favorite names to invest in.

I like Macy's a lot I do expect them to see a little bit of -- slowdown in the month of June.

Which will be reported on Thursday however they are taking share from competitors they're in all the hot categories.

Yeah they can drive significant earnings growth on.

On sort of a low single digit comp store sales and I'm expecting for for GM.

They also have a very strong free cash flow yield they're buying back stock.

And I think that they'll -- superior earnings growth you've got -- like Coach yet another Coach of fossil at and let me get to fossil -- down 37%.

Over the past year what makes you think that this is one that's poised to do well.

That it's it's been quite a decline I think they did cut earnings guidance early.

And recently -- come -- and cut earnings estimates for all of my company's but I think the story with fossil is is just oversold.

I'm certainly they've seen a slower rate of growth there are some challenges in their European business -- I think that.

Europe for them they've already taken the pain they've reduced expectations.

And the stock to your point has come down quite significantly.

I think that at this valuation does a really compelling entry point for -- -- we finish up what is your list of names to avoid at this point.

I've been under perform on Urban Outfitters for some time I think stocks overvalued and I don't expect a near term cop turned.

I'm also a little bit cautious on Abercrombie and -- I'm neutral on both those stocks but I am significantly below consensus expectations.

For earnings and I think that just doesn't set up well.

Although the stocks are -- you know relatively cheap.

Liz Dunn of Macquarie looking at all of the names and really at this point liking Macy's Coach and fossil thank you for joining us.

Thanks avenue has.

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