BOSTON (Thomson Financial) - Expectations for tax rebates to stimulate
specialty retail spending are overstated, according to Cowen & Co., which said
Thursday that as specialty retailers report first-quarter results over the
coming weeks, management teams will likely continue to be cautious in their
guidance which could stall the recent outperformance of retail stocks.
"Results from a recent Cowen survey of over 1,000 consumers suggest that
rebate funds will be used primarily to pay bills and/or purchase essential
items, thereby likely accruing limited benefit to specialty retailers," the
broker said.
Cowen said the average respondent to the study intends to apply "only" 15.4%
of the refund funds to non-essential items and 65% of respondents don't intend
to apply any of the funds at all.
Discount stores are the most likely destination for rebate funds, the firm
said, followed by big-box superstores. Cowen also said 45% of respondents
indicated they would be very likely or likely to shop at a retailer that
provided an additional incentive for spending a tax rebate at their store.
Given this view, Cowen recommends investors choose retailers which have
managed for a consumer slowdown via prudently managed inventories and controlled
expenses, such as AnnTaylor Stores, Men's Wearhouse and Williams-Sonoma.
Greg Saulnier
gs/vj
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