NEW YORK ( TheStreet) -- Retail stocks made a remarkable recovery in 2010, but despite big gains, there were still some significant losers.

Overall, the S&P Retail Index jumped 23.2% for the year to date period to 506.89.

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After some robust gains, it would be easy to dismiss the laggards in the New Year. But digging into these stocks could reveal some bargain picks for 2011.

Of course, there is generally a real reason why a stock has fallen out of favor. The key is determining whether the company's problems are fixable in the near-term, or if ultimately the business model is broken beyond repair.

>>10 Top Retail Stocks of 2010

Even if it is the former, investors shouldn't expect to see quick returns. It could take some times for these names to start showing upticks, but once they do, shareholders could reap substantial rewards.


Given this, TheStreet used I-Metrix to rank the biggest retail losers of 2010. It is worth noting that out of the 10 stocks that saw the largest declines, four were women's apparel retailers.

This doesn't come as a surprise, since women were among the first to pull back on spending amid the recession. These retailers were also struggling prior to the economic downturn following a string of fashion misses.

Here's a complete look at the 10 biggest losers and which are poised to rebound in 2011, and which will continue to underperform the sector.

10. 1-800-Flowers

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1-800-Flowers ( FLWS - Get Report) has seen continued weakness at its primary floral business, leading its stock down 6.1% to $2.45 for the year.

While its key business is selling floral arrangements, the company has also acquired other brands to expand its gift offerings, such as Fannie May, which produces chocolates; Cheryl & Co., which makes baked goods; the Popcorn Factory, which offers popcorn and other snacks in designer tins; and WineTasting.com, which offers wine gifts. And most of these divisions are actually seeing growth.

Nonetheless, 1-800-Flowers is down more than 80% from its peak in 2007. Aside from 2007 and 2008, the company has not been profitable and it operates at very low margins.

"While the company is focused on driving improved gross margin results as it reduced its promotional levels and shifts its focus on driving operating efficiencies through the leverage of their business platform, we believe there will be little relief for the remainder of the year," Beder wrote in a note back in October. "As such, we prefer to remain on the sidelines until we begin to notice a sustainable return to top-line growth."

At the end of its first quarter, 1-800-Flowers had $19.1 million in cash, $57 million in term debt and $30 million outstanding from its existing credit line.


9. New York & Company

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Whether or not New York & Company ( NWY) makes a good buying opportunity in 2011 depends how far along you believe the women's apparel retailer is in its turnaround and its long-term relevancy in the space.

Oppenheimer, which initiated coverage on the company last week with an outperform rating and price target of $5, believes this is the prime time to get in on the stock since it is in the early stages of a recovery.

The burden of this recovery rests on the shoulders of President Greg Scott, who will take the reins as CEO in February. It is up to him and his team to realign the merchandise to satisfy the core New York & Company shopper.

In its second quarter, New York & Company significantly upped its inventory levels, hoping to drive traffic and sales. But when the customer did not respond to these efforts, management was forced to slash prices, which ultimately led to a material drag on gross margins.

New York & Company has spent several years shifting its focus to a younger shopper, featuring short shorts and dresses that weren't appropriate for its target demographic, says Brean Murray analyst Eric Beder. As a result, it has seen sales fall more than 20% over the past two years.

While Scott has been credited with having already implemented initiatives to fix these mistakes, unfortunately, any material changes won't be fully recognized until the first quarter of fiscal 2012, Beder notes.

In light of this, Beder recommends remaining on the sidelines until there are more tangible changes at the store level and is a clearer indication of the company's potential going forward.

New York & Company's bright spot is its outlet business, adding 16 new locations this year and starting to design merchandise solely for the division. "We continue to view the outlet stores as a vital cog in regaining some of the pricing luster to its core units," Beder wrote in a note. "Their ability to act as a safety valve to remove inventory overages should prove invaluable."

In 2011, the company plans to open between four and nine outlet locations, with the potential for a base of 75 outlets.

Shares of New York & Company have fallen 8.3% to $4.44 during the year-to-date period.


8. Sears

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Is it too late for Sears ( SHLD)? Now that government incentives for energy-efficient appliances have expired, it seems shoppers don't have a reason to go to Sears. In turn, investors are finding few reasons to pony up, sending shares sinking 18.7% to $67.78 for the year.

In its third quarter, Sears reported a bigger loss of $218 million, or $1.98 a share, compared with a loss of $127 million, or $1.09, in the year-ago period. Revenue slipped to $9.7 billion from $10.2 billion, while same-store sales fell 4.8%.

Both income and sales have been on a downward spiral since 2007, and the department store is on track to report a loss in 2010, having reported a loss of $241 million for the first 39 weeks of the year.

As a result, Sears is heavily relying on the holiday season, and is making some desperate attempts to boost sales. Sears remained open for the first time ever on Thanksgiving Day, offering layaway promotions, and has been aggressively discounting, even before Black Friday.

In appliances, which have been Sears' bread and butter, its market share has dropped to about 32% from over 40% at the start of the millennium.

Chairman Edward Lampert has refrained from investing in stores, which analysts credit as one of the biggest catalysts for Sears' demise.

The department store's only real "savior" has been its Kmart chain, which at the very least, is showing some signs of improvement. But even this division lags other discounters.


7. Office Depot

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Office Depot has struggled this year to compete against larger rivals like Staples, sending shares down 24% to $4.90 in 2010.

The office-supply retailer suffered eight quarters of losses before swinging to a profit in its third quarter. During the three-month period the company earned $64 million, or 18 cents a share, compared with a loss of $398 million, or $1.51, a year earlier.

But excluding one-time items, Office Depot actually earned just 3 cents a share, and revenue declined 4.3% to $2.9 billion.

In October, Steve Odland resigned as chief executive after settling improper disclosure charges with U.S. regulators. Office Depot, Odland and another former executive agreed to pay $1 million to settle charges with the Securities and Exchange Commission.

The group was accused of selectively conveying to analysts and institutional investors that the company wouldn't meet Wall Street estimates near the end of the its second quarter of 2007.

Odland has been replaced on an interim basis by board member Neil Austriam.

Analysts viewed Odland's departure as an overall positive, as investors became skeptical of his leadership following significantly earnings declines since 2006.

Last week the company said it is selling its Japan business to Japanese distribution company Kakuyasu. Office Depot opened stores in the country in 1996, but has not operated any location in Japan since selling them off in 2009.

Office Depot has $678 million of cash and $731 million of debt.


6. Christopher & Banks

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While Christopher & Banks ( CBK - Get Report) hit new yearly lows in recent weeks, its brand cachet still makes it a viable concept going forward.

The women's apparel retailer isn't a stranger to hardships, having successfully survived two turnarounds in 1997 and 2003.

This time around, its rebound won't be quick, most likely not occurring until new leadership is in place. In October, Christopher & Banks announced that it replaced Chief Executive Lorna Nagler with chairman Larry Barenbaum, who will serve on an interim basis.

Its also worth noting that the company is up against very easy sales comparisons heading into next summer.

Given both of these factors, a logical timeframe for a turnaround won't be until the second-half of 2011.

The company will also be adding retail veteran, G-III Apparel CEO Morris Goldfarb, to its board of directors effective Jan. 3.

Shares of Christopher & Banks have dropped 25.5% to $5.85 so far this year.


5. Coldwater Creek

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It looks like investors may have given up on Coldwater Creek ( CWTR).

Shares of the women's apparel retailer sank to their lowest levels in more than 19 months last week, sans any real catalyst dragging down the stock other than investor frustration. Overall, Coldwater Creek's stock has tumbled 42.3% to $2.74 during the year-to-date period.

In its third quarter, the company reported a surprise loss, which it attributed to fashion misses in its fall assortment, as well as weak economic conditions. And it doesn't appear a recovery is on the horizon in the near term.

"We expect the challenges we experienced with our fall assortment to continue during the fourth quarter," the company said.

Analysts do not foresee an improvement in merchandise for at least three months, when Coldwater Creeks rolls out its spring assortment. But even then, there's no guarantee that the company's spring line will be received any more favorably than its fall merchandise.


4. Supervalu

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Supervalu ( SVU) is the most unloved grocery stock, with shares down 32% for the year and carrying the shame of being one of the only S&P 500 stocks with no buy rating from analysts.

This sentiment isn't totally off base, as the grocery chain comes with a long list of concerns, including negative same-store sales and a massive debt load. At the end of its last quarter, Supervalu had $7.1 billion in total debt, most of which stemmed from its acquisition of Albertsons chain back in 2006.

This mound of debt led Moody's Investor Services to downgrade ratings on Supervalu earlier in the month. The ratings agency does not expect the company's performance to improve anytime soon, and said Supervalu may need to borrow a significant sum under its revolving credit facility in early 2011.

Management has taken strides to cut its long-term debt, but these moves could also restrict store investments, potentially marring its competitive positioning, Moody's said.

Supervalu swung to a loss of $1.5 billion, or $6.94 a share, in its most recent quarter, from a profit of $74 million, or 35 cents, in the year-ago period. The company attributed the loss to one-time charges, and on an adjusted basis, earned 28 cents a share, which was still short of consensus estimates.

Former Wal-Mart ( WMT) executive, Craig Herkert took over as Supervalu's chief executive in May 2009, and is currently in the process of cutting costs, selling assets, lowering prices and paying down debt.

Most recently, Supervalu sold its 14-store Bristol Farms supermarket for an undisclosed sum.

It appears some of his efforts are starting to pay off, as the company projects same-store sales to improve from the first half to second half of 2011.

The company has $203 million in cash and $7.1 billion of debt. It cut its debt by 13% over the past year.

Wall Street is banking on Supervalu's small grocery chain Save-a-Lot, as a vehicle for growth. The company plans on doubling the number of these stores over the next five years.

Competition in the grocery sector has been heating up, as middle-of-the-road chains like Supervalu, have been struggling to take on Wal-Mart's low prices and Whole Food's ( WFMI)brand cache.


3. Rite Aid

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Is there a cure for Rite Aid's ( RAD - Get Report)ailing problems? At least in 2011 it seems unlikely.

The drugstore started on its downward spiral long before the economic recession. Since it acquired the Brooks/Eckerd chain in 2007, Rite Aid has been suffocating under mounting debt and tepid sales.

Most recently, Rite Aid cut its 2010 outlook, and is now expecting a loss between 60 cents and 74 cents a share, from previous guidance of a loss of 46 cents to 67 cents. The company also said fourth-quarter same-store sales will miss estimates and it expects to fill fewer prescriptions in 2011 than previously forecast.

In its third quarter, Rite Aid reported a loss of $79.1 million, or 9 cents a share, compared with a loss of $83.9 million, or 10 cents, in the same period last year. While the company managed to narrow its loss, revenue still dropped to 2.3% to $6.2 billion and same-store sales slipped 1.3% during the period.

While Rite Aid has blamed a weaker cold-and-flu season for declining same-store sales over the past several months, November marked its eighteenth consecutive month of a sales decrease. Rivals Walgreen ( WAG) and CVS Caremark ( CVS), on the other hand, have been posting profits, as Rite Aid drowns in red ink.

In an effort to boost sales, Rite Aid is eyeing the grocery segment. On its third-quarter conference call with analysts, the drugstore chain said it has added grocery sections to 10 stores in South Carolina through a partnership with Supervalu. Rite Aid's CEO John Standley said on the call that front-end sales at these stores have approximately doubled on average. He even noted that these locations could be used as a model to enter more urban markets.

Shares of Rite Aid have traded between 86 cents and $1.77 during the 52-week period. The stock has fallen 38.3% in 2010 to close on Friday at 92 cents.

Earlier in the year takeover chatter speculation surfaced, with analysts saying Rite Aid could be acquired by Walgreen or CVS, or by discount behemoth Wal-Mart ( WMT), which has been attempting to grow its pharmacy business.


2. Charming Shoppes

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Plus-size apparel retailer Charming Shoppes ( CHRS - Get Report) has seen shares plummet 44.8% to $3.56 since the beginning of the year.

In its third quarter, the company reported a smaller loss of $18.8 million, or 16 cents a share, helped by lower operating expenses and well-targeted promotions. Revenue also grew 1% to $463.6 million, while same-store sales rose 3%.

While it appears trends are slowly improving, the abrupt departure of CEO Jim Fogarty in October raised concern. Fogarty was originally brought in as a financial turnaround specialist to help improve the company's depleted balance sheet.

Now that Charming Shoppes is back on somewhat solid ground, the company said it is time to find a leader with retail experience. Nonetheless, Wall Street is skeptical of this explanation of Fogarty's resignation.

Anthony M. Romano, the executive vice president of global sourcing and business transformation, was appointed chief operating officer to oversee day-to-day operations as the retailer searches for a replacement.

Charming Shoppes owns more than 2,100 stores under the brands Lane Bryant, Fashion Bug and Catherine Plus Sizes.


1. American Apparel

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American Apparel ( APP) was the biggest loser in 2010, as shares tumbled mover than 50% to $1.56.

It's not hard to see why, as the company, which is better known for its edgy ads and unconventional CEO, rather than its colorful t-shirts, has faced a string of problems: declining sales, mounting debt and covenant breaches, SEC investigation, delayed earnings filings, auditor charges, immigration probes and a class-action suit.

So far, American Apparel has been able to stave off bankruptcy, recently securing an amendment to its credit agreement with lenders. But the company has said that it expects a loss from operations in 2010 and warned that if its lenders crack down and the company is not able to find alternative sources of liquidity, it may not be able "to continue as a going concern."

In its most recent quarter, American Apparel reported yet another loss, as same-store sales plunged 16%.

American Apparel is looking to get rid of inventory any way possible, recently taking to Groupon, a members-only discount Web site. Last month the company offered $50 worth of merchandise for $25.

Investors received a jolt of optimism earlier in the month when Chairman and Chief Executive Dov Charney purchased nearly $4 million in company shares. But analysts still view this move with skepticism.

In October, American Apparel hired former Blockbuster ( BLOAQ.PK) Chief Financial Officer Tom Casey to fill the role of acting president.


Given this all of this, which depressed retail stock will see the biggest recovery in 2011?


Which battered-down retail stock will make the biggest recovery in 2011?

Rite Aid
Sears
Office Depot
Supervalu
American Apparel

--Written by Jeanine Poggi in New York.

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