The Zacks Analyst Blog Highlights: Gap, Urban Outfitters, Sears Holdings, Wal-Mart Stores and Target

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Oct 15, 2012, 09:30 ET

CHICAGO, Oct. 15, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Gap Inc. (NYSE:GPS), Urban Outfitters Inc. (Nasdaq:URBN), Sears Holdings Corporation (Nasdaq:SHLD), Wal-Mart Stores Inc. (NYSE:WMT) and Target Corporation (NYSE:TGT).

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Here are highlights from Friday's Analyst Blog:

Gap Launches New Japanese Sites

Leading apparel retail chain, Gap Inc. (NYSE:GPS), continues with its global online expansion and is now set to further explore the Japanese market. The company announced the launch of its new online shopping sites in order to better serve its Japanese customers. The new Japanese e-commerce sites, gap.co.jp and bananarepublic.co.jp, will sell merchandise including Gap, GapKids, babyGap and Banana Republic brands.

The new sites will focus on Gap's innovative "Universality" platform and will integrate both the Gap and Banana Republic brands under one, simpler e-commerce platform. Apart from providing an extraordinary online experience to its Japanese patrons, these new sites reaffirm the company's keen interest in easing the way more people can reach its signature American style merchandise.

Additionally, these 24-hour sites will enable customers to shop Gap's products in the comfort of their homes and at any hour of the day. The sites detailed product descriptions along with swifter delivery and free shipping make shopping easy for customers.

Gap Inc. also has its own e-commerce sites for customers in China, Europe and Canada. Additionally, the company provides the facility of shopping online through its U.S. e-commerce sites and delivers its products internationally in about 90 countries.

Earlier this month, Gap's close competitor, Urban Outfitters Inc. (Nasdaq:URBN) announced its entry into Japan with the signing of a multi-year agreement with World Co. Ltd. for the distribution and marketing of its specialty clothing brand, Free People in Japan. Through the agreement, the company will have its clothing brand distributed throughout Japan from shop-in-shop locations, direct-to-consumer sites and stand-alone stores.

This move by Urban Outfitters marks its full-scale entry into the Japanese market and is in line with its plan of solidifying its presence in Asia. The company will commence its operations with the Free People brand's spring 2013 collection.

Gap currently maintain a Zacks #2 Rank, which translates into a short-term Buy rating. Our long-term recommendation on the stock remains Outperform.

Sears Separates Hometown Biz

In order to improve financial performance and enhance its liquidity position, the largest U.S.-based broad line retailer Sears Holdings Corporation (Nasdaq:SHLD) has recently announced the successful separation of its Sears Hometown and Stores business. The newly separated company has been named Sears Hometown and Outlet Stores, Inc. and is scheduled to be traded on the Nasdaq Capital market from today under the ticker symbol SHOS.

The separation, which has been completed through a rights offering, fetched the company gross proceeds of $446.5 million, including a cash dividend of $100.0 million prior to the separation. Sears Holding has distributed 23.1 million shares of Sears Hometown to subscribers.

As part of the separation transaction, Sears Hometown entered into a secured revolving credit facility agreement with a consortium of financial institutions. The company can borrow a maximum amount of $0.250 billion under the credit facility. Moreover, it has partially utilized the fund to pay dividend to Sears Holdings.

The company has long been grappling with weak top-line performance and even weaker bottom-line results. Moreover, as of July 28, 2012, it had a huge long-term debt burden of $1.970 billion while cash and cash equivalents stood at just $0.730 billion.

In an effort to optimize its financial performance, the company took a number of measures to focus on its core businesses and reduce investment in sections that no longer contribute significantly to its growth.

In doing so, Sears Holding announced its intention to partially spin-off its interest in Sears Canada Inc. Sears Holdings currently has a 95% ownership interest in Sears Canada, which it intends to reduce to 51%. The move is expected to enhance Sears Holdings' liquidity position. The company expects to successfully close this transaction in the second half of 2012.

We believe that the company's strategy of capitalizing on opportunities while increasing profitability through its revamped organizational structure and new operating model will boost its top and bottom line. Apart from this, Sears Holding is focusing on cost containment, inventory management and merchandise initiatives to improve margins.

Sears Holdings, which competes with Wal-Mart Stores Inc. (NYSE:WMT) and Target Corporation (NYSE:TGT), currently retains a long-term Neutral recommendation. Also, the company has a Zacks #2 Rank, implying a short-term Buy rating.

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