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Investors Might Consider A Pair Trade For Express And Chico's

Express, Inc. NYSE:EXPR, Chico's FAS, Inc. NYSE:CHS - Investors Might Consider A Pair Trade For Express And Chico's

Deutsche Bank's Paul Trussell commented on the expected disparity between Express Inc EXPR, and Chico's FAS CHS in the retail market. Over the next two weeks, both companies are expected to report Q2 earnings and Trussell believes both companies could head into significantly different directions.

Positioning In The Retail Industry

According to Trussell, Express has benefited from the "overall pickup in apparel spending as demonstrated by Old Navy" and others given Express' "trend-right" assortment and significant customer engagement.

"Given overall positive commentary on apparel trends from the dept. stores, AEO, and URBN, we have greater confidence that EXPR likely capitalized on its trend-right assortment, in our opinion," stated the analyst. Additionally, Express' new brand ambassador strategy was expected to aid the company's earnings respective to Chico's, according to Trussell.

Inventory Differences

On Chico's, the analyst remained cautious given elevated inventories heading into Q2 and a competitive women's apparel environment. The analyst, however, admitted Chico's would "pick up steam" later in the year.

While Chico's inventories would work against its margins, Express' inventories were in "respectable shape," adding to potential margin benefit in the following quarters according to the analyst.

Trussell has a Buy rating on Express and a Hold rating on Chico's.

DateFirmActionFromTo
Apr 2016Deutsche BankInitiates Coverage onBuy
Mar 2016BlueFin ResearchMaintainsMarket Outperform
Mar 2016NomuraMaintainsBuy

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