Sector Snap: Discount retailers

Two RBC Capital Market analysts on Friday said discount retailers are faring well as consumers hunt for bargains during the recession. They initiated coverage of Tanger Factory Outlet Centers and TJX Cos. with "outperform" ratings.

Rich Moore wrote in a client note that Tanger, which operates off-price shopping centers, is well poised to benefit as consumers gravitate toward discounts.

"As the only pure play owner of factory outlet centers in the real estate universe, Tanger is, we believe, uniquely positioned to capture upside from this economic downdraft," he wrote.

Tanger shares rose $1.52, or 4.8 percent, to $33.12 in afternoon trading. The stock has traded between $24.62 and $46.30 over the past year.

Meanwhile, Howard Tubin said TJX Cos., which operates T.J. Maxx and Marshall's, will also benefit from the current economic environment. The company has lean inventories, is geographically diverse and has a history of returning cash to shareholders, he said.

Tubin said those attributes are not reflected in the share price and initiated coverage with an "outperform" rating.

Shares fell 11 cents to $26.03.

He also initiated coverage on discount store Ross Stores Inc. with a "sector perform" rating.

Although the company is performing well amid the difficult environment, he said, it is not as geographically diverse as TJX and has limited store growth opportunity.

Shares fell 21 cents to $36.79.