Zacks.com releases the latest Analyst Interview. Today’s interview is with senior analyst Mario Ricchio, who discusses Wal-Mart (NYSE: WMT), Costco (Nasdaq: COST), GameStop (NYSE: GME), Citi Trends (Nasdaq: CTRN) and Deckers Outdoor (Nasdaq: DECK).
A synopsis of today’s Analyst Interview is presented below. The full article can be read at http://at.zacks.com/?id=2678.
To what extent do you feel the government stimulus checks will help out retailers?
The checks are being sent out at the beginning of May, so I expect some retailers to benefit in the second quarter. Unfortunately, I suspect that most people will use their tax rebate checks to pay down credit cards and other debt. Whatever is left will be used to buy gas or groceries. Two retailers that should benefit the most from the tax rebate checks are Wal-Mart (NYSE: WMT) and Costco (Nasdaq: COST).
If these checks were sent out in July (ahead of the back-to-school shopping season) or in November (at the beginning of the holiday shopping season), I could see the retail sector experience a nice boost in sales. May is typically the slow season. Consumers don’t a have reason like the new school year or Christmas gifts to go out to the mall and shop.
Do you have any Buy-rated stocks you’d recommend at this time?
Despite the all the headwinds, I became more constructive on retail stocks at the beginning of March. I upgraded the group from Underperform to Market Perform. Retail stocks declined by so much from August 2007 to February 2008 that most of the negative news was already reflected in the stock prices. As a result, I have been upgrading several stocks in my coverage list. But most of those upgrades are from Sell to Hold.
A few names I like right here are GameStop (NYSE: GME), the video game retailer. Video games have been largely immune from the consumer spending issues, and 2008 should be another banner year for video game sales. I also like Citi Trends (Nasdaq: CTRN), a retailer of value-priced urban apparel. I’ve liked their long-term growth story for some time, and it should be one of the few apparel retailers that benefits from the tax rebate checks.
Another name is Deckers Outdoor (Nasdaq: DECK), the maker of UGG boots. The company recently reported blow-out numbers for the first quarter and upped its guidance for the rest of the year. It appears that no one told Deckers that consumer is struggling.
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