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Lazard Capital Senior Retail Analyst Jennifer Davis on the state of the retail sector and the retail stocks that offer opportunities for investors.
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Consumers did keep a tight lid on their wallets last month as retail sales inched just higher by only 110 of a percent.
Look you could look toward the fact that the payroll tax cut expired.
And that cut people's ability to spend plus continued sluggish job growth so are we setting up for a slow year in retail.
-- obviously joining us now Jennifer Davis -- not capital senior retell analysts stunned I would Jennifer thank you for being at this wanna get into before -- you pixels psyche of the consumer right now.
Yes it was extremely spend a minute.
Sign of growth -- generate basically the same.
But I say that that's pretty good considering his -- said the payroll tax hike eight it seems to me that consumers are holding their ground.
Well also January really doesn't matter if this is such a small volume months January and February both I mean I think we'll get a better read once you get into march and April timeframe.
But yeah I mean there's concern around the consumer with the increase in payroll taxes but.
I'm cautiously optimistic the American consumer manages to spend regardless of the environments that you have another -- -- -- -- Englander saying in a note that retail sales in January is the most important data point you disagree obviously it's almost a -- away it sounds like for you.
Therefore what's next what is important on the horizon.
Well you know what I think once we get into -- march April.
Sales that that's a little more important for us but in the meantime I'll be looking -- unemployment looking at consumer confidence.
And seeing how the consumers holding -- but if I'm an investor and I'm saying okay I'm gonna position right now during -- quiet time.
When some things are cheap.
Let's go with your first pick and that -- -- which struggled recently yes at Coach that I had to sell off I think two weeks ago when they reported earnings so I think that this is a great buying opportunity.
The great brands at great management team here great free cash flow over a billion dollars annually they've got a one point four billion dollar share repurchase program.
And the stock's trading at twelve times I think you know that its historical average is about fifteen point five times.
This here's an investment -- so earnings are depressed a little bit but next year I think they'll return to mid teens earnings growth.
So think that this is a great opportunity for cuts.
Looking GAAP one of the -- picks had a good year last year no doubt about it -- you think that -- have to continue to grow this year.
Idea that's kind of that concern I hear from investors on the gap -- they had a great 2012.
So Ken they.
Reports strong results on top of strong results in 2013.
And we believe they can we believe the merchandise is that the end up much better this year and -- they can continue to com positively on top of positive comps.
And that a lot of margin opportunity people they also have all Canadians -- which is as it is a very popular option at least on the lower end yet.
Yet that's the set -- a lot markedly to the bottom line here.
You have day yet I mean all Canadian GAAP for the two biggest concepts.
Within GAAP -- so both of them are very important.
Going on to TJ Max that they have continued to improve the ways they do this success they might have to do is walk into one other stores and it's no longer a free for all people throwing things tougher at.
I can elect -- reflects -- -- on the floor things all over the place he walked in now and and there are choices of size.
And good quality designer's death and they've done a much better job merchandising the story I think -- kind of what you're alluding to with more for a waiver accidents that have all of the long -- rails and you have to -- to find things that.
They've reduced inventories in the store and made it easier for the customers shop for -- -- -- actual event for -- I think it's a very good description exactly what it's like.
Limited Brands let's finish off your -- full fake here.
Same store sales growth of 9% very impressive to deal -- and they become a keep it up.
Yeah well probably not the 9% and again January is it's a little bit of an anomaly at such a small volume month you know.
1% increase for limited.
In December would be about twenty million dollars that's when he million dollars in January as a 2.5 percent on -- it's it's you know results are exacerbated in January.
But that said you know I think that they still can post done solid -- next year and I think they have a tremendous opportunity internationally.
Jennifer thank you for sharing your kids will put them up our FaceBook page so that everybody can see FaceBook dot com slash after the bell -- to see you think you you Jennifer Davis of will czar.
All right.
