Analysts Pick Their Black Friday Winners & Losers

Early Friday morning, opportunistic shoppers will spend hours scouring for some of the year's best deals, creating "clear winners and losers" in the retail sector, BMO Capital Markets analysts John Morris and Brandon Cheatham said in a note this morning. 

"As the post-election rhetoric has started to abate, we believe that the U.S. consumer will come through in a big way and do what it does best - buy all the things," the analysts said. 

Still, a number of retailers recently issued downbeat guidance for the current holiday quarter. Just last week, shares of Gap (GPS)  and L Brands (LB) tumbled after the companies respectively projected full-year and current-quarter earnings below analysts' estimates. 

But retailers appear to be approaching guidance with an "abundance of caution," positioning themselves for upside, Morris and Cheatham said.

"In our view, most of the negative outlook for holiday is company specific, and the key to 4Q outperformance will be on-trend product and overly negative expectations," they added.

Specifically, the firm is optimistic about Gap's namesake and Old Navy brands, American Eagle Outfitters (AEO) , Express (EXPR) and Coach (COH) .

This past weekend, Express kicked off Black Friday week sales with bigger and broader promotions from last year, though sweaters were less promotional and denim sales were in line with last year's, MKM Partners analyst Roxanne Meyer said in a note today.

Promotions at both Gap and Old Navy were down year-over-year ahead of Black Friday weekend, according to Meyer. 

"With inventory industry-wide seemingly well controlled, we think it is too soon to push the panic button, especially if a cold snap in weather turns things around in this critical week," Meyer said.

Unusually warm weather has led retailers to discount tops, sweaters and outerwear the most, but a cool front in the Northeast could "reverse a likely negative trend at a time when it matters most," she explained.

Meyer pointed to off-price retailers such as TJX Cos. (TJX) , Ross Stores (ROST) and Burlington Stores (BURL) as bright spots in a tough retail environment, claiming that Burlington in particular is most likely to outperform compared to a year ago.

BMO's Morris and Cheatham are cautious on lululemon (LULU) , Abercrombie & Fitch (ANF) and L Brands's (LB) Victoria's Secret this holiday season. 

There has been an uptick in promotions at lululemon and Victoria's Secret, excluding its panties section, Meyer said. For lululemon, though, the amount of discounted SKUs has halved since its peak in October, she noted.

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