Sector Snap: Specialty apparel

Specialty apparel retailers begin reporting this week, including Urban Outfitters Inc. on Thursday and Abercrombie & Fitch Co. on Friday.

Retailers are suffering from the weak economic environment, which is causing consumers to cut back on spending, and reported weak October sales in stores open at least one year, or so-called same-store sales, nearly across the board.

"Sector expectations (are) extremely low," wrote Friedman, Billings, Ramsey analyst Adrienne Tennant in a client note Tuesday. "Expect companies to be very conservative with guidance. Companies will trade on guidance rather than third-quarter results."

Tennant expects women's apparel retailer Charlotte Russe Inc., which reports fourth-quarter results Wednesday, to miss expectations.

"Our channel checks for Charlotte Russe have been fairly unremarkable," wrote Tennant, who rates the company "Market Perform."

She expects Urban Outfitters Inc. to perform better, but noted that analysts have high expectations for the company. Due to the weak environment she lowered her price target on the stock, which she rates "Market Perform," to $20 from $23.

She said Abercrombie & Fitch Co. will likely miss analyst consensus expectations but kept her "Outperform" rating on the stock due to its longer-term value.

Goldman Sachs analyst Michelle Tan said most of the third-quarter "bad news" is already out, with some expectations, but remained cautious.

"We expect focus to mainly be on forward looking issues, with little optimism," Tan wrote in a client note Tuesday.