4 Retail Stocks That Can Thrive Post Reopening: Here's Why

Many retail stocks are moving higher as reopening plays after the widespread adoption of the COVID-19 vaccine. UBS is out with some upgrades to some of its best of breed retail stocks that can thrive as reopening trades and after the trend has disappeared.

The Retail Analyst: UBS analyst Jay Sole upgraded the following retail stocks from Neutral to Buy. He also said the companies don’t have strong long-term growth priced at the current levels and raised the price targets on all of them:

Kontoor Brands Inc KTB price target increased from $53 to $74.

Gildan Activewear Inc GIL price target increased from $35 to $43.

L Brands Inc LB price target increased from $54 to $96.

Abercrombie & Fitch Co. ANF price target increased from $31 to $46.

The Retail Takeaways: The big question from UBS is how long will the reopening trade last. The analyst thinks the rally could end in September.

“This causes us to increasingly favor stocks with strong and underappreciated post-pandemic growth prospects over those without them,” Sole said.

The four companies upgraded by Sole have made “bigger adaptations than previously thought,” as evidenced by their recent earnings reports.

Related Link: What Does Kontoor Brands Debt Look Like?

Kontoor Brands, Gildan Activewear, L Brands and Abercrombie & Fitch are all likely to beat EPS expectations or see P/E expansion, according to Sole. These stocks are favored over names that could have larger leverage related to reopening.

UBS plans to monitor apparel spending, its COVID-tracker, mobility tracker and denim tracker to find the best retail stocks situated for long-term growth.

“Our view is once the industry sales growth rate inflects to deceleration, the market will have good insight into the magnitude of the rebound and be better able to forecast CY22 EPS.”

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(Photo: L Brand's Victoria's Secret via L Brand)