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Retail Stocks Turn Red on Citi Outlook

NEW YORK ( TheStreet) -- Retailers are giving up earlier gains after Citi released a disappointing second-half outlook.

Citi analyst Deborah Weinswig lowered her earnings estimates and price targets for Home Depot (HD - Get Report), J.C. Penney (JCP), Kohl's (KSS), Lowe's (LOW - Get Report), Nordstrom (JWN), Macy's (M - Get Report), Saks (SKS), Target (TGT - Get Report), and Wal-Mart (WMT - Get Report), to reflect a more conservative outlook.

"The consumer went on a shopping binge in the first quarter of 2010 and the subsequent hangover has set in," she wrote in a note. "A challenging macro environment, lack of fashion and difficult comparisons on the horizon will make this consumer hangover tough to kick."

As a result, the S&P Retail Index is giving up some of its morning gains, falling 0.5% to 383.99. This follows last week's plunge of 45% to close on Friday at 385.

But Weinswig did reassure that she doesn't think the economy is headed for a double-dip recession.

She recommends playing defensive stocks in the second-half of the year, like Dollar General (DG), or Family Dollar Store (FDO). Family Dollar is scheduled to report its third-quarter earnings on Wednesday before the bell.

Bebe (BEBE - Get Report) lost some of its momentum, but has still climbed 6.8% to $6.76. The specialty apparel retailer announced this morning that it plans to shutter its PH8 concept. The Bebe company will close or convert 48 PH8 stores, which will result in a pre-tax charge of $17 million. As a result, Bebe said it will be at the low-end of its fourth-quarter forecast.

Bebe also said it will pay a one-time special cash dividend of $1 a share on July 30 to shareholders of record July 21.
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Blockbuster (BBI) is back in the red, falling 0.9% to 17 cents after being up nearly 10% earlier this morning.
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