'Wednesday's With Wedbush' On PreMarket Prep Plus: How Is The Retail Sector Looking?

On PreMarket Prep Plus "Wednesday’s With Wedbush," Senior Equity Research Analyst Tom Nikic covering the footwear and apparel sectors joined the broadcast.

Overview: Nikic was asked to provide a macro overview of the retail sector coming out of a strong earnings season for many companies coupled with the recent threat of the omicron variant.

Nikic says a few stocks in his area of coverage “got ahead of themselves” and companies such as Under Armour UAA had a “slam dunk” report. As a result, the bar was set very high bar for other companies. He added that the “supply chain uncertainty” makes it an “expectations game” moving forward.

Foot Locker: In Nikic's opinion, Foot Locker FL has two fundamental concerns. The first is supply chain issues, which the company's biggest supplier Nike Inc. NKE has been transparent about. He predicts there may be some production problems that affect supply in early 2022.

The other concern is the company having been a “big beneficiary” of the stimulus package that many of its customers may have participated in. Much of the demographic the company serves in part of the “sneaker culture” and with some “extra cash in their pocket” may be at their stores.

Because of the aforementioned factors, along with tough quarterly comparisons coming up, he has a Neutral rating on the issue.

More Room On The Upside: When asked about which issue in his area of coverage that has not met up to all expectations, but still may move higher is Ralph Lauren RL. He cited the full reopening of the economy as the potential positive catalyst for the retailer.

As consumers move out of “wearing sweatpants” at home and return to the office, they may want some new apparel. Along these lines, with things getting back to normal, “going out” and doing more things more instigate the desire for some new threads.

Finally, the upcoming “inventory restocking cycle in the wholesale channel should be big for them” when that comes to fruition.

The full discussion from Wednesday’s broadcast with Tom Nicii can be found here:

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