Jefferies On Retail: Here Are The Best Ways To Invest In '16

After another tough year in 2015, retail stock investors may finally have cause for optimism heading into 2016. In a new report, Jefferies analyst Randal Konik explained why the stage could finally be set for a retail comeback this year.

Circumstances Have Changed

While there is no question that the retail space will continue to face some of the same challenges that have weighed it down in recent years, Konik believes that an improving environment coupled with retailers that are better-prepared to weather the storm has the industry well-positioned for 2016.

"The combination of easy compares, a healthy consumer, more rationalized real estate fleets, & attractive valuations (especially on cash flows) both on an absolute & relative basis makes us more optimistic for our group in 2016," Konik explained.

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Ratings Changes

In addition to upgrading 2016 Best New Idea Tiffany & Co. (NYSE: TIF) to Buy, Jefferies has also upgraded Lululemon Athletica inc. (NASDAQ: LULU) to Buy. It's not all bullish news in the space, however, as Konik downgraded 2015 underperformer Fossil Group Inc (NASDAQ: FOSL) and Chico's FAS, Inc. (NYSE: CHS) to Hold.

Top Picks

Overall, Konik believes that luxury, handbags, apparel and golf will be the retail categories that shine in 2016. Jefferies names Tiffany, Lululemon, Coach Inc (NYSE: COH), Abercrombie & Fitch Co. (NYSE: ANF), Calloway Golf Co (NYSE: ELY) and ClubCorp Holdings Inc (NYSE: MYCC) as its top retail stock picks this year.

Disclosure: the author holds no position in the stocks mentioned.