The Yahoo Finance Live team discusses UBS' downgrade to Sell for a number of retailers, including Foot Locker, Urban Outfitters, Ross Stores, and Burlington.
JOSH SCHAFER: UBS is selling some retail names. Let's take a look at some of those retail names today, specifically Foot Locker, Urban Outfitters, Ross Stores, and Burlington all catching downgrades and sell ratings from UBS in a note published today. Analyst Jay Sole warning of a consumer spending slowdown impacting those companies. Specifically with Foot Locker, Sole points to Nike's emphasis on direct-to-consumer sales impacting Foot Locker share of Nike sales as well as Foot Locker's consumer likely coming under pressure as the economy tightens. Overall, Sole pointed to apparel spending and how that has not been nearly as resilient as, say, travel or other areas. Now, UBS data matches what recent card data out of Bank of America shows as consumer spending on BofA cards has declined at a steady pace throughout the start of this year.
But, Dave, I do want to end on a positive note here, so they are still bullish on some names-- Nike, Deckers, On Holding, and Skechers. And really the highlight there is that the high-end consumer will keep buying, and also a lot of those companies are very good at footwear. High-end consumer footwear is going to continue, so those companies are well positioned there versus some of the other companies we named at the top there like a Foot Locker that doesn't have nearly as much of a high-end consumer might not hold up.
DAVE BRIGGS: Yeah, Nike got a 2% move today. Under Armour not mentioned, up 4%, so benefiting from some sort of wins there.
But what jumped out to me about what Jay wrote is to many a recession significantly weighing on soft goods sales is a bear case, but for us, it's a base case. And that was-- I know you ended on a high note, and I took it right back down to a very low note. A base case of recession is something we haven't heard in quite some time and not something that any of us are excited to hear, certainly not in the investment space.
SEANA SMITH: No, certainly not, and a lot of that was based on the spending data that UBS has been tracking now for quite some time. They're seeing a pullback much more earlier and a much bigger pullback than they were initially expecting.
You would have to think even some of those names that he still has outperform ratings on wouldn't be posting as strong of a number if we, in fact, do get that recession.
DAVE BRIGGS: Yeah, we hope he's wrong on the recession.