BBWI - Bath & Body Works named 'top pick' Ulta downgraded in Goldman retail review

In a sweeping review of the retail sector, Goldman Sachs named Bath & Body Works ( NYSE: BBWI ) a top pick while shaking up a host of ratings.

“BBWI stock has started to appreciate more meaningfully since the company reported in late November after an inline sales result but better than expected merchandise margins,” the note explained. “We continue to recommend BBWI into 2023 given a higher level of newness in stores, increased digital interest and higher sales driven by the company’s new loyalty program, and some easing inflationary headwinds on both products costs and transportation.”

Goldman’s team added that the stock continues to trade at a discount to peers, undeservedly so in the bank’s estimation. A $52 price target was assigned to the stock alongside a Buy rating.

Elsewhere, the bank outlined multiple new Sell ideas and shifted two ratings to Neutral.

In terms of new Sell calls, both RH ( RH ) and Genuine Parts Company ( NYSE: GPC ) received a newly bearish reception. RH was called a Sell due to concerns on big-ticket purchases and erosion of demand, while Genuine Parts’ ( GPC ) elevated valuation was called into question.

“Although we note that shares of GPC may be attractive in the current environment, primarily due to the company’s consistent execution, defensive positioning, and recently better-than-expected results, in our view, there has been no material change in GPC’s business to drive a valuation well above the historical ranges,” the team said. “We also note a potential top line risk from the company’s exposure to Europe given growing macro concerns, while industrial production is expected to slow next year.”

The bank’s price target on RH ( RH ) was trimmed to $215 from $227 while the target on Genuine Parts Company ( GPC ) was reduced to $124 from $147. RH stock slid 7.7% in midday trading while Genuine Parts ( GPC ) edged about 0.8% lower.

A brightened outlook for Best Buy ( BBY ) and a dimmed view of Ulta Beauty ( NASDAQ: ULTA ) were also offered in the updated research. Both stocks are now rated Neutral on balanced risk-reward dynamics.

The bank’s analysts indicated that they still expect a “challenging demand environment in the near term” for Best Buy ( BBY ) at the same time that the bottom line is hurt by a broadly promotional environment. However, that impact is largely baked in at the stock’s paltry valuation.

Ulta ( ULTA ), by contrast, was lauded for its strong performance against an unsteady macro backdrop. Yet, more difficult comparisons into 2023 as consumers continue to come under pressure and likely cut back on discretionary purchases.

“We are downgrading ULTA to Neutral from Buy given our view that share gains from here are likely more limited, ULTA faces difficult y/y compares following a strong 2022, margin risk skews to the downside given a high level of investing next year and current valuation suggests limited upside,” the bank concluded.

Read more on Ulta’s most recent earnings results .

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