Expect Increased Outlook From Express, Francesca's, Strong Traffic At lululemon

• Express, Inc. EXPR shares are up 4 percent since December 7, while shares of Francesca's Holdings Corp FRAN and Lululemon Athletica inc. LULU have jumped around 14 percent.
• Wedbush’s Morry Brown maintained Outperform ratings for all three companies.
• Brown expects Express and Francesca's to raise guidance, while lululemon continues to achieve strong sales trends.

Analyst Morry Brown believes that Express could raise its 4Q guidance on the back of a margin improvement, with SSS likely tracking at the high end of its low-single-digit guidance. He expects Francesca's to also raise its 4Q guidance, since sales and margins seem to be tracking above plan.

lululemon’s comps appear to be tracking at or above the high end of its mid-single-digit guidance, and margins in-line with expectations.

Express: Improved Sales, Margin

The company continues to generate meaningful y/y sales growth and margin expansion, despite a tough retail backdrop. Brown believes there is upside to management’s 4Q guidance and to consensus 1Q estimates, with improved merchandise margins given ongoing reductions in y/y promotional events.

While a substantially better inventory position boosts confidence in the margin opportunity, improvement in merchandise execution should continue to boost top-line, the analyst added.

The price target for the company is at $26.

Francesca's: Better Holiday Clearance

During week five of December, the “clearance breadth and depth of the store post-Christmas was much lower year-over-year and merchandise assortments remain on trend,” Brown wrote.

Francesca’s offered an additional discount of 40 percent, same as last year, while the number of racks and average markdown rate were lower year-over-year. “Our checks indicated solid traffic and sell through with apparel racks light and heavy interest in jewelry,” the report added.

The price target for the company is at $19.

lululemon: High Traffic, Conversion

While clearance inventory was broadly in line, markdown rates were marginally higher. The stores witnessed strong traffic and conversion trends across all regions throughout the Holiday season.

“On the whole, our read is positive, as we believe strong traffic and the reduction in markdowns prior to Christmas offsets the modest uptick in markdown rate post-Holiday (particularly given that guidance already factors in margin erosion during 4Q),” Brown commented.

The price target for the company is at $56.