According to Citi, the squeeze on lower-income consumers shown in last week’s earnings report is a “wake-up call” for retail companies including Gap. Analyst Paul Lejuez downgraded a range of apparel names, saying in a note Monday that it would be difficult for companies to pass on the increased costs to consumers due to “even some well-run retailers.” (WMT/TGT)” was surprised by the inflationary pressures associated with the ongoing conflict in Ukraine. Lejuez wrote: “Last week was a wake-up call for the retail industry to see the stars (already very aligned in 2021) being skewed towards F22. “[We] is reducing our earnings estimates for a range of companies that we believe are most at risk of falling margins in 2022 (mainly apparel companies). And we’re taking a more cautious view of the demand outlook for these same retailers in 2023,” he continued. The company believes that companies like Gap are under pressure because they have so stockpile at a time when consumers are shifting away from merchandise Lejuez expects the apparel category to get more “promotional” over the next few quarters.Gap shares have fallen nearly 5% in the past year. pre-market trading on Monday. “Companies should look to pass higher costs on to consumers, but this will likely be harder than in 2021 due to high inventories relative to sales. sell. This is especially true for apparel items where promotions are ramping up,” wrote Lejuez. Here are the downgrades and price target cuts from Citi: Abercrombie and Fitch: neutral from buy, PT down $30 from $59 American Eagle Outfitters: neutral from buy, PT to $14 from $39 Kohl’s: neutral on purchase, PT to $39 from $55 Ralph Lauren: neutral on purchase, PT to $98 from $140 Carter’s: sell on buy, PT to $68 from $110 Distance: sell from neutral, PT to $8 from $13 Children : sell from neutral, PT to $36 from $48 Urban Outfitters: maintain buy, PT to $30 from $42 Under Armor: neutral from buy, PT to $10 from $19 — CNBC’s Michael Bloom contributed to this report.
Men wearing face masks walk past a Gap store at a shopping area, as the country is suffering from an outbreak of a new type of coronavirus, in Beijing, China on February 7, 2020.
Jason Lee | Reuters
The squeeze on lower-income consumers shown in last week’s earnings report is a “wake-up call” for retail companies including Gapaccording to Citi.
