Specialty Retail/Department Stores Get 'A Trump Bump'; 4 Stocks Upgraded To Buy

In a note released Monday, Citi said it is turning more bullish on the specialty retail and department store universe following Donald Trump's election victory. The firm's logic? The likelihood of tax reform provides a bump that many of the retailers in its universe needed, as consumers may be left with more money in their pockets to spend.

Accordingly, the firm upgraded its ratings on four retail stocks in its coverage universe.

USD Strength To Help U.S.-Focused Retailers

Analyst Paul Lejuez said he is generally more constructive on the retailers having a higher percentage of sales generated in the United States, given the likelihood of the dollar strengthening. The analyst also said he looked at EPS sensitivity to comps, short interest, EBIT margins and valuation multiples to cherry pick stocks from within its overall more bullish stance.

4 In Focus

1. Citi's preference for Boot Barn Holdings Inc BOOT stems from the fact that oil prices/rig count is stabilizing, its customer base is red state, its exposure is purely to the United States, short interest is high and valuation is attractive.
2. The firm recommends buying Chico's FAS, Inc. CHS due to its depressed EBIT margin, the operational improvements in the work in the company, upward bias to sales, nearly 100 percent U.S. exposure, customer base turning more confident and attractive risk/reward.
3. Kohl's Corporation KSS is also deemed a buy by Citi, as its exposure is purely to the United States, short interest is high, customer base is more confident, valuation is attractive and sales/earnings have upside potential.
4. To L Brands Inc LB, Citi is attracted by its attractive long-term growth opportunity, with its two dominant brands, namely Victoria's Secret and Bath & Body Works, high percentage of U.S. revenue and attractive valuation.

However, Citi remains less constructive on more defensive off-price retailers Ross Stores, Inc. ROST and TJX Companies Inc TJX, as these have high multiples. However, the firm still views their businesses as great.

Rating Changes:

• Boot Barn: Upgraded to Buy from Neutral; price target upped to $19 from $12.
• Chico's FAS: Upgraded to Buy from Neutral; upped to $16 from $13.
• Kohl's: Upgraded to Buy from Neutral; upped to $64 from $50.
• L Brands: Upgraded to Buy from Neutral; upped to $84 from $74.

At Last Check

• Boot Barn was up 1.64 percent at $15.51.
• Chico's FAS shares were up 8.39 percent at $14.85.
• Kohl's was up 7.42 percent at $57.17.
• L Brands was up 2.03 percent at $70.57.
• Ross was up 1.18 percent at $64.39.
• TJX was flat at $75.41.