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Retailers Poised for Best March in 16 Years

Retail sales, which are due out on Thursday, are expected to show the biggest growth since 1994.



) -- Retail sales in March are expected to be bolstered by a trifecta of warm weather, easy comparisons and the Easter holiday shift.

The S&P Retail Index hit a 52-week high on Tuesday of 460.97, as expectations for the sector continue to rise ahead of comparable sales results, which are due out on Thursday.

The International Council of Shopping Centers, for one, expects March to see the best sales results since 1994. The research firm said on Tuesday that it now foresees sales between 8% and 10% for the month, from prior forecast of 3% to 3.5%.

If ICSC's forecast is correct, March would mark the third consecutive month of stronger-than-expected comparable sales growth.

Aside from surprise results, investors will also be keeping an eye out for any companies that raise guidance. Among those that are expected to up outlooks are




Ross Stores

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American Eagle Outfitters

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For American Eagle, investors are looking for the teen retailer to raise first-quarter guidance by a couple of pennies if same-store sales are up double-digits in March, J.P. Morgan analyst Brian Tunick wrote in a note.

Even with the announcement that American Eagle will shutter its flailing Martin + Osa chain it has been underperforming the sector. The fear is the company will not be able to drive significant upside once inventory increases, higher managerial costs kick in and the possibility of lower material prices, Brean Murray analyst Eric Beder wrote in a note.


Abercrombie & Fitch

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was the big surprise in February, posting its first monthly gain since November 2007. The question is, will this momentum continue?

"We continue to view the company's drive to register comparable sales via lower prices as further eroding their core user base and replacing it with customers who will desert the company if it inevitably tries to raise pricing," Beder wrote. "We remain negative on the short term at Abercrombie and believe investor hopes have been raised to unsustainable levels."

Within the teen space, Aeropostale and


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face tough comparisons, as two of the only four retailers that posted positive same-store sales in March last year.

Other potential winners include





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"We believe that companies like TJX have fallen back into favor given its attractive valuation, stable business model, hedge against a potential 'double-dip' economic downturn, and in TJX's case, an international square-footage story as well."

In the department store sector,


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is pegged to be the big winner over the next year. Analysts are forecasting the high-end department store to report a same-store sales gain of 9.7%.

"We believe the company's well-edited assortment, excellent customer service, and ease of shopping through all channels are differentiating factors helping the company to gain market share, particularly as the consumer is demonstrating a renewed interest in shopping," Stifel Nicolaus analyst Richard Jaffe wrote in a note.

There are also high expectations for Limited Brands, as analysts are predicting a 5.7% jump. "We believe anything less than a high-single-digit comp would be treated as bad news by investors with the stock at current levels," Tunick wrote.

While Easter fell earlier than last year, spurring purchases in March, analysts are not predicting a significant drop-off in April, since pre-Easter trends were strong.

Still, analysts caution that inflated expectations by the market may not bear fruit as the economy enters the second-half of the year.

"We continue to see weak employment data and consumer confidence, while better than prior period, it is nowhere near what we would expect for sustainable improvements," Beder wrote. "When combined with tougher comparisons, rising staffing costs, and at best, flat material pricing, we believe many of the current "turnaround" plays will be exposed in the second half of the year."

By the second half of the year multiples will be approaching the high-end of ranges seen during the last five years, Sozzi wrote. As they hit these peaks, it is highly likely the retail stock rally will cool off.

-- Reported by Jeanine Poggi in New York.

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