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Stick To High Quality Growth Names In Apparel Retail: MKM

MKM Partners’ Roxanne Meyer initiated coverage on a number of clothing retailers Thursday, and her Buy-rated names are L Brands (LB), lululemon athletica (LULU), The Gap (GPS) and TJX Companies (TJX).

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She writes that overall, the increasing importance of ecommerce and heavily mounting value-oriented competition are the two biggest disruptors in the sector at the moment, which will test brand relevance and force business model changes—and ultimately emphasize the gap between the haves and the have-nots.

She has four key takeaways on this:

1. we view growth of the value segment as the bigger threat, making product differentiation critical to survival; 2. that the most forward-thinking, high-growth retailers are stepping up SG&A to fuel sales is a virtuous cycle, and points to how difficult the environment is; 3...