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Analyst: Luxury Retailers Are Poised for Rebound

Monday, 04 Jan 2010 11:03 AM

The new year could be brighter for luxury retailers, as improving stock markets and economic conditions pave the way for a potential recovery, an analyst said Monday.

While shoppers remained budget conscious in 2009 and flocked to discount retailers, Randal Konik of Jefferies & Co. said luxury retailers like Tiffany & Co. and Ulta Salon, Cosmetics & Fragrance Inc. will be among those that could see improved business in 2010.

The analyst upgraded both Tiffany and Ulta to "Buy" from "Hold."

Konik also cautioned in a client note that increased cost pressures will push down operating leverage during the second half of the year.

Operating leverage is a measurement of the degree to which a company relies on a combination of fixed and variable costs.

That would leave retailers dependent on sales growth to achieve higher earnings, which Konik thinks will be a challenge.

The analyst cut American Eagle Outfitters Inc., Chico's FAS Inc. and Gap Inc. to "Hold" from "Buy" and reduced AnnTaylor Stores Corp., Ross Stores Inc. and TJX Cos. to "Underperform" from "Hold."

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The new year could be brighter for luxury retailers, as improving stock markets and economic conditions pave the way for a potential recovery, an analyst said Monday.While shoppers remained budget conscious in 2009 and flocked to discount retailers, Randal Konik of...
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