NEW YORK — It’s not the calendar, it’s the assortment.

That was among the messages delivered by UBS Warburg analyst Richard Jaffe as he hosted a conference call last week examining the preparedness of a handful of specialty retailers for the post-Thanksgiving onslaught known as Black Friday — a name that conjures up images of stores packed like cattle cars and the official start of the season that many retailers hope will lift their bottom lines into and beyond the break-even line.

"We think Black Friday can be a telling indicator, not conclusive, but a key piece in the mosaic for holiday sales," he said. The malls are highly promotional, highly competitive retail avenues and "those who are not differentiated will seek to compete on price."

Operating clandestinely — and periodically getting chased out of stores for snapping pictures — Jaffe visited four major markets, snapping pictures and observing setups in 50 stores in malls and street locations in Pennsylvania, Connecticut, New Jersey and here.

Those under his microscope, though, received mixed grades. Drawing from his observations, he said American Eagle Outfitters, Gap, Urban Outfitters, Too and Pacific Sunwear were "particularly well-positioned" for Black Friday, while Wet Seal, Charlotte Russe and Charming Shoppes "may have some difficulties."

How most of the retailers fared both on Friday and overall last month won’t be revealed until they report same-store sales on Thursday. This November’s results, noted Jaffe, will benefit from comparisons with an unseasonably warm year-ago month, but a later Thanksgiving this year will tend to pull comparable-store sales results downward.

These anomalies, said the analysts, will make combined results from November and December a more accurate comparison.

In a slide presentation that accompanied the conference call, Jaffe asserted: "The bigger issue is product, not the calendar. Unique, appealing product and prices that reflect compelling value will be the two key drivers this quarter."

For November and December combined, he expects Gap to manage a 2 to 4 percent comparable-store-sales increase, versus the year-ago drop of 17 percent. The Limited’s comps are also expected to rise 2 to 4 percent, though its year-ago results were down 4 percent. Among the small-cap teen retailers, he said, Wet Seal’s comps should fall 5 to 7 percent, after a 6 percent uptick a year ago, and American Eagle is expected to dip 1 to 3 percent after falling 4 percent in the combined November-December period last year.Overall, Jaffe expects apparel retailers’ comps to rise 1.2 percent for the two-month period. This compares with the year-ago comp dip of 4.5 percent.

Trends that will drive sales included: a black and white color palette; very bright colors, especially in fleece, and stripes on everything from sweaters to gloves, hats and other accessories.

"The velour tracksuit and the yoga suit at all price points is a key look for both leisure around the house and casual dressing," he added. "It’s also a particularly easy gift to give since it comes in three sizes — small, medium and large — and tends to be a very flattering look for most women."

Denim also continues to be a compelling trend, noted Jaffe. Denim inventories are up about 25 percent and they account for about 15 percent of the inventories of teen retailers, a segment particularly drawn to the fabric.

"Sweaters will be competitive," he noted, "If they’re appealing, it’s not an issue."


Jaffe said Gap Inc. would be one of the Black Friday winners. "We’re very encouraged by what we’re seeing in Gap. We think the Gap traction here is quite strong and, with approximately 30 percent more advertising dollars being spent this quarter, we think they could drive traffic as well as top line."

The specialty stalwart has figured out how to merchandise color better, returned to its denim roots and featured its brightly colored fleece in the front of the store, he said.

"The pricing promotions we’re seeing at many of these [specialty] stores, including Gap, is the benefit of very opportunistic sourcing last fall. With excess capacity, retailers were very successful at sourcing at lower costs than in prior years," he noted. Accordingly, an anticipated a slow start to the holiday season has made many retailers aggressive about taking their markdowns early, removing some of the cushion from their margins.

Limited Brands is another one of Jaffe’s winners. Its Victoria’s Secret unit, with its cozy sleepwear and fragrance and gift sets, has found more giftable items for a wider audience than its signature sexy lingerie.The firm’s Express division, he said, has historically been "very effective at maximizing gross margin dollars" with its promotions. This should continue along with a fine-tuning of the assortment as the retailer seeks to find the "secret formula."

The firm is not without its weaknesses, though. "Express has focused their sweaters on more romantic and more feminine looks," he noted. "Initially, the reaction’s been only OK. The sweater business across the board has been somewhat challenged, with Express suffering a bit."

Coming off a tough third quarter, Jaffe’s looking for American Eagle Outfitters to get back on its feet. "Third quarter left a lot to be desired and a lot of merchandise that was not desired." On Black Friday, he noted, the firm would probably be trying to clear inventories by offering 30 to 50 percent off on already marked-down merchandise.

"To American Eagle’s credit, they’ve been very effective in times when they’ve stumbled in getting clearer product in," he said. "We don’t think this year will be any exception."

Urban Outfitters Inc. , noted Jaffe, "has really made their mark by differentiating themselves, by appealing to that collegiate customer who wants something different, wants to be a bit more cutting edge." Vertical stripes on pants, which were among Urban’s offerings when Jaffe embarked on his store tour, qualify as "really out there on the cutting edge."

Other retailers expected to fare well with their differentiated assortments are Pacific Sunwear of California and Too.

Jaffe described TJX Cos. as "the 800-pound off-price gorilla" with a greater presence in its market than Staples in office supply or The Home Depot in the do-it-yourself realm. Part of the secret to its success is tables, which he said were "a key way to accelerate traffic through the stores, to ease the shopping experience for that value-conscious shopper on the treasure hunt and to broaden their appeal through the holiday season." The firm also has been successful with jewelry, an easy gift choice.


There were also retailers Jaffe expected to face an uphill battle at the start of the holiday season. Talbots, with its historic focus on more structured clothing, has underperformed, has lean inventories and is maintaining a defensive position, he said. Talbots will focus on what’s been its strengths with sweaters and sportswear.Charming Shoppes was aggressively promotional and burdened with an empty parking lot during his tour. Wet Seal, the analyst noted, "took a big bet this fall on suede and it’s a lingering bet, one that will haunt them through the rest of the season — expensive merchandise now at discounted prices."

Charlotte Russe Holdings could also be challenged this holiday season with slowing denim sales. "They were late to the denim party and did not catch on to the trend of low-rise in the last year-and-a-half," noted Jaffe.

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