Tucker Anthony Downgrades Gadzooks

Analyst Steven Richter says the retail environment remains challenging ahead of the key back-to-school season

Tucker Anthony downgraded Gadzooks Inc. (GADZ ) and Pacific Sunwear (PSUN ) to buy from strong buy and downgraded American Eagle (AEOS ) to marker perform from strong buy.

Analyst Steven Richter says since early spring he's been positive toward most of the leading youth retailers. However, with the back-to-school transition about to occur next month, he's taking a more cautious approach towards the group because the retail environment remains fairly promotional, which is likely to prove challenging for many retailers.

Given the choppy outlook, Richter thinks Pacific Sunwear, Gadzooks and American Eagle are among those whose risk/reward ratios are becoming less favorable. He says his favorites in the group remain Too, Inc. (Too ), Venator Group (Z ), and Abercrombie & Fitch (ANF ). He thinks Shoe Carnival (SCVL ) also is well positioned.

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