Prudential cut its rating on the specialty softlines group to market underperform from market perform, and cut AnnTaylor (ANN ) and Talbot's (TLB ) to hold from buy.
Analyst Stacy Pak says excellent year to date performance has caused group valuations to be stretched at a time when the consumer is questionable and the seasonally weak second quarter is approaching. She also notes many retailers look to be running below plan in May.
While inventories are tight, Pak says promotions appear to be accelerating, and the potential Longshoremen's strike suggests an inventory glut or disruption could also be in the cards.
Pak thinks retail as a whole may be tough, but adds that it makes sense to stay with the best stories in group such as her buy-rated Abercrombie & Fitch (ANF ) and Limited (LTD ).