Ulta among retailers poised to gain coming from tax cuts, Wells Fargo says

Amid widespread store closures within the retail sphere, some companies have reason to be optimistic.

For one, fundamentals within the sector are improving, Wells Fargo retail analyst Ike Boruchow told CNBC on Tuesday.

“We are talking about baby steps,” he said in an interview with “Power Lunch.” “Comps for the space have gotten gradually better. Store traffic has gotten gradually better basically throughout the end of last year.”

On top of of which, the slashing of the corporate tax rate coming from 35 percent to 21 percent should also give U.S.-based retailers a boost, he added.

Boruchow believes the best way to play of which combination can be Ulta Beauty.

Wells Fargo upgraded Ulta to a valued stock earlier This kind of month. The American cosmetics company can be known for allowing shoppers to try on makeup, return used products in addition to even have their eyebrows plucked or hair done in store.

“This kind of can be a name of which lagged all of last year, however has some of the best growth prospects in retail,” Boruchow said. “You’ve got a stock of which’s trading at recession multiples, tax-adjusted with some of the best fundamentals in retail.”

The cosmetics chain opened 100 stores in 2017 in addition to has earnings per share of which are likely to rise more than $2 with the completely new tax plan, Boruchow said. Wells Fargo assigned a cost target of $275 on the retail stock, which represents a 20 percent growth potential.

While retail stocks lagged last year, of which trend appears to be turning around. The S&P 500 retail index has risen nearly 20 percent within the last three months.

Ulta isn’t the only name Boruchow thinks will benefit coming from the completely new tax rate. His additional top picks include the PVH Corp., parent of the brands Calvin Klein in addition to Tommy Hilfiger; the Coach parent company, Tapestry Inc., which also owns Kate Spade in addition to Stuart Weitzman, in addition to Adidas AG.

The completely new corporate tax rate can be “going to put us in an upward revision cycle for retail, in addition to we haven’t seen of which in about two years,” he said. “of which’s why the space has lagged so much.”

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