S&P: Abercrombie, bebe Among August Winners in Retail

Plus: Analysts comment on TiVo's July quarter, widen loss estimates on Pier 1 Imports, and more

From Standard & Poor's Equity Research

Retail stocks: Reports August index

Analyst: Marie Driscoll, CFA

Our sales-weighted index of 17 apparel retailers registered an August +2.01 (vs. year-ago +2.23) same-store sales gain, below our expectations as Gap's (GPS) 7% comp decline reduced this metric by 157 basis points. Our broader measure of 27 retailers (mass, warehouse and departmentstores) generated a +2.90 reading (vs. +3.92). The mean apparel same-store sales gain was +3.6%. American Eagle (AEOS) and bebe (BEBE), both ranked 4 STARS (buy), and Abercrombie & Firch (ANF), ranked 5 STARS (strong buy) remain clear winnersand we see continued momentum for them. Limited's (LTD; 3 STARS, hold) 18% gain at its Victoria's Secret unit far exceeded expectations.

SLM (SLM) : Ups to 4 STARS (buy) from 3 STARS (hold)

Analyst: Stuart Plesser

The price of the shares has declined about 11% over the last three months, offering what we view as a good buying opportunity. SLM's business fundamentals remain strong in our view, and we believe the company should benefit from increasing demand for post-secondary education and rising tuition costs. Added benefit should also be provided by a pickup in loans for other types and levels of private education. Our 12-month target price remains $57, 18.5 times our 12-month forward earnings per share (EPS) estimate of $3.08.

TiVo (TIVO) : Maintains 5 STARS (strong buy)

Analyst: Tuna Amobi, CPA and CFA

July quarter loss per share of 7 cents vs. a penny loss, is 7 cents narrower than our estimate. Despite much higher TiVo direct-subscriber acquisition costs, and offsetting decline in net adds via DirecTV (DTV), we see strides in differentiation, distribution, and potential scalable advertising. We also see intellectual property aided by progress in EchoStar Communications (DISH) patent litigation. TiVo expects third quarter net loss of $12 million to $17 million, within range of our view, as the company seems to be addressing potential hurdles. Our 12-month target price remains $12.

Pier 1 Imports (PIR) : Reiterates 3 STARS (hold)

Analyst: Michael Souers

August comp-store decline of 9.1% is worse than our projection of a 6% decline. While we believe merchandise offerings have improved at Pier 1 Imports, we continue to expect weak customer traffic in the near term as a result of macroeconomic conditions and lack of differentiation from the company's many core home furnishings competitors. We are widening our fiscal year 2007 (ending Feb.) and fiscal year 2008 net loss estimates, to losses of 61 cents and 32 cents, respectively, from losses of 54 cents and 20 cents. And we are also lowering our 12-month target price to $6.50 from $7.

Greater Bay Bancorp (GBBK) : Cuts to 1 STAR (strong sell) from 2 STARS (sell)

Analyst: Stuart Plesser

We have become more concerned about the growing percentage of riskier construction loans held in Greater Bay Bancorp's portfolio. These loans comprised about 16% of total loans at the end of the second quarter vs. 10.5% at the end of 2004. At the same time, the company has been supporting its earnings by releasing reserves. We are reducing our 12-month target price by $1, to $24, a 13.6 times multiple applied to our $1.77 2006 EPS estimate, which is at a discount to peers based on by what we believe is the inferior quality of Greater Bay Bancorp's recent earnings.

Dow Chemical (DOW) : Maintains 3 STARS (hold)

Analyst: Richard O'Reilly, CFA

Dow Chemical's decision to shut down several plants, mostly in Canada, seem to us more a reflection of issues at specific plants, rather than any industry situation. The site in Sarnia, Ontario lost its feedstock pipeline supply earlier in 2006, resulting in the shutdown of two resin manufacturing plants, while the chlor-alkali plant in Alberta is old. The company's remaining Alberta plants, including its largest ethylene facility, have a competitive feedstock supply. Our 12-month target price remains $40, or 8 times our 2007 EPS estimate of $5.00.

Rowan Companies (RDC) : Reiterates 3 STARS (hold)

Analyst: Stewart Glickman

Rowan Companies said it will mobilize two of its four Tarzan-class jackups from the Gulf of Mexico to the Middle East on four-year contracts at an average dayrate of about $188,000/day. Rowan Companies said the relocation will be completed by the end of the first quarter. We think the two rigs to relocate will be the Hank Boswell (under construction, due in Dec. 2006) and the Scooter Yeargain (earning $170,000 per day in the Gulf). Despite the high number of rigs expected to leave the Gulf industry-wide, we see potential for further such moves, given availability of longer-term deals at attractive dayrates.

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