Every New Year brings predictions and sadly, this one maybe based on economic fact. From Wall Street’s perspective, the retail sector is not looking too good, as analysts predict a recession or at the least a deeply
believe the U.S. will fall into a recession or get pretty darn close in
the first half of 2008," said Jeff Black, senior vice president at
Lehman Brothers. "The current earnings slowdown mirrors the lead-up to
the  recession, with growth declining against easy comparisons."
According to today’s WWD, analysts are expecting most companies to lower earnings estimates for February and March.
Even teen retailers, which were believed to be immune to
higher energy and food costs, a weak labor market and the subprime
mortgage crisis, are seen as facing top-line growth challenges. Black
expects Abercrombie & Fitch Co. and American Eagle Outfitters Inc.
to experience operating margin erosion in 2008.
luxury retailers should fare better than most, sales in the sector will
also be more moderate than in the past, said Roz Wells, chief economist
at the National Retail Federation.
"Overall, there is a weaker spending environment, but
this doesn’t mean we don’t have retailers who are doing well," Black
said. His top picks include Urban Outfitters Inc., Anthropologie, Gap Inc. and
AnnTaylor Stores Corp. The last two will experience turnarounds in ’08.