Gap (GPS) and L Brands (LB) Upgraded after a Record-Breaking Holiday Weekend

According to the National Retail Federation, More than 154 million shoppers hit the malls – or the web – during Thanksgiving weekend, above last year’s 151 million. Despite the average dollar amount spent per shopper during the holiday weekend falling from $299.60 last year to $289.19 this year, the final data showed new retail peaks.

Following both a record Black Friday and record-breaking Cyber Monday, the busiest day of the year for e-commerce, investors are turning their attention to retailers.

Yesterday, Piper Jaffray notched up its ratings on Gap Inc (NYSE:GPS) and L Brands Inc (NYSE:LB), the parent company of popular brands like Victoria’s Secret and Bath & Body Works, citing positive changes in consumer spending behavior recently.

“Against a backdrop of accelerating momentum seen in holiday spending trends via our proprietary survey work and in the counsel of various industry updates over the Black Friday weekend, we are moving our investment rating on both GPS and LB,” the firm said in an analyst note on Monday.

Piper Jaffray is still somewhat worried about how much market share Gap has lost as of late, as well as how dependent L Brands has gotten on how strong its Victoria’s Secret “PINK” brand – which consistently bolster the company’s comparable-store sales growth. The Wall Street firm is confident, however, that “broad-based relief is on the horizon for consumer discretionary spending, of which each GPS and LB could participate in by the rising tide.”

Piper Jaffray’s retail survey found the highest Black Friday participation in five years: 39 percent of those who were surveyed said they shopped this year (either online or at brick-and-mortar retail locations), compared to just 31 percent last year – and 34 percent in 2014. Moreover, 66 percent of respondents who went shopping over the weekend ended up buying something, representing a six percent improvement from last year’s Black Friday data.

According to Piper, Gap was one of the biggest upside surprises when it reviewed its survey data. Deckers Outdoor Corp (NYSE:DECK) was another surprising winner from the big weekend. Gap and Urban Outfitters Inc (NASDAQ:URBN) are the firm’s first choices for the holiday season this year.

The author does not have any positions in the above mentioned companies.

Tim is a contributing analyst for and specializes in equities trading and public offerings. He is a graduate of UCLA and began his career doing capital markets research for a top investment banking software provider.