Analysts at Sterne Agee have four top picks among the retailers: Signet Jewelers Ltd. (NYSE: SIG), Kate Spade & Co. (NYSE: KATE), Tiffany & Co. (NYSE: TIF) and Ulta Salon, Cosmetics & Fragrance Inc. (NASDAQ: ULTA). All are Buy-rated.
Signet Jewelers has just completed its acquisition of Zale’s and the Sterne Agee analysts believe there is meaningful accretion potential from the merger that has not yet been adequately reflected in the Street’s estimates or in the stock price. Investors have pushed the stock to a 52-week high of $108.82 last Thursday before it pulled back a bit on Friday to close at $106.09. The consensus price target on the stock is $113.50, which implies a potential gain of about 7%.
Kate Spade is the new name for clothier Fifth & Pacific. The name change was made in February, and since then the company has sharpened its focus even more on high-end brands. Sterne Agee likes the company’s impressive comparable-store sales and believes the firm has the ability to begin showing operating leverage this year. Shares closed at $36.41 on Friday, in a 52-week range of $19.90 to $40.75. The consensus price target on the stock is around $42.25, which implies a potential gain of 16%.
Tiffany posted a new 52-week high of $99.68 on Friday. The analysts at Sterne Agee point to gross margin strength based on cost deflation and the firm’s ability to maintain its premium pricing as particular strengths. Tiffany’s has also reached an inflection point in its U.S. business and enjoys structural growth drivers in China. The consensus price target on the stock is around $104.60, which points to an implied upside of about 5.2%.
Sterne Agee’s fourth top pick is Ulta, as the analysts believe the company’s top-line growth will remain strong. Ulta has held the line on markdowns and that is expected to help keep margins high. The reports first-quarter earnings next week and is expected to post EPS of $0.74 on revenues of $699.15 million. Shares closed at $84.90 on Friday, in a 52-week range of $80.35 to $132.72. The consensus price target on the stock is $108.50, which implies a potential gain of nearly 28%.
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