Analyst Upgrades

• Canaccord believes growth in DigitalGlobe's (DGI) commercial business will be a catalyst for shares. The firm upgraded shares to buy from hold and has a $38 price target on the stock.
• Standpoint upgraded Abercrombie & Fitch (ANF) to accumulate from hold based on valuation. The firm has a $47 target on the stock.
• Morgan Keegan upgraded Open Text (OTEX) to outperform from market perform based on the company's strong FY2011 EPS outlook.
• Devon Energy (DVN) was upgraded to overweight from equal weight at Morgan Stanley.
• Magna (MGA) was upgraded to outperform from sector perform at RBC Capital.
• EnCana (ECA) was upgraded to outperform from neutral at Macquarie.

Abercrombie & Fitch (ANF) announced an increase in sales for the five-week period ending April 3.

Abercrombie net sales increased 19% compared to the same five-week period a year ago. And though comparable sales results for March increased 5%, they missed the 6.6% sales growth expected by the Street.

According to Abercrombie, total domestic net sales, including direct-to-consumer net sales, increased 10%. International sales for the company increased an impressive 112%.

Old Navy is back!

At least, that's what most media outlets are reporting. According to Associated Press, "the bad economy has been good for the chain's lower-price Old Navy brand, which was retooled last year to resume catering to frugal moms after an ill-fated foray into trendier fashions."

Could we see a bit of a drop from American Eagle Outfitters (NYSE: AEO) today? The retailer announced that its October same-store sales fell 5%, when the Street expected an increase of 1.7%. This disparity certainly seems to suggest that we could see the stock fall in today's trading action. The equity may find a measure of support from its 10-week moving average, which has filled this role throughout the stock's calendar-year rally. There seems to be some long-term support from AEO's 10-, 20-, and 50-month moving averages; all of which are in the $15 -$17 region. If the stock is going to fall, this support could be crucial. A drop through this resistance could spell a stock slide.

As earnings season begins to wind down, some apparel retailers are scheduled to report quarterly results this week. Analysts polled by Thomson Reuters anticipate that Walmart Stores Inc. (NYSE: WMT), the 800-pound gorilla in the space, will report that it earned $0.77 per share in the first quarter, about the same as in the first quarter of last year. But JCPenney Co. (NYSE: JCP), Kohl's Corp. (NYSE: KSS), Nordstrom Inc. (NYSE: JWN), and Urban Outfitters Inc. (NASDAQ: URBN) are expected to report lower profits for the first quarter as consumers continued to hold off on spending. Macy's Inc. (NYSE: M) and Abercrombie & Fitch Co. (NYSE: ANF) are expected to have swung to a loss year over year.

Whole Foods Market Inc. (NASDAQ: WFMI) and Winn Dixie Stores Inc. (NASDAQ: WINN) are likewise expected to report declining earnings, while the Great Atlantic & Pacific Tea Co. (NYSE: GAP), parent of the A&P supermarket chain, is expected to have narrowed its net loss 68.9% to $0.28 per share.

Analyst upgrades:

• Baird upgraded Regal-Beloit (NYSE: RBC) to Outperform from Neutral based on valuation and growth expectations.
• Black & Decker (NYSE: BDK) and Lennar (NYSE: LEN) were upgraded to Buy from Neutral at UBS based on valuation.
• Kroger (NYSE: KR) and Public Storage (NYSE: PSA) were added to Goldman's Conviction Buy List.
• CIBC upgraded Biovail (NYSE: BVF) to Sector Performer from Sector Underperformer.
• Abercrombie & Fitch (NYSE: ANF) was raised to Neutral from Underperform at Cowen.

• Merrill downgraded Campbell Soup (NYSE: CPB) to Neutral from Buy and expects marketing and promotional spending to limit earnings growth in 2009 and 2010. The firm lowered their target to $35 from $42.
• Mechel Steel (NYSE: MTL) was cut to Underweight from Equal Weight at Morgan Stanley to reflect declining coal demand.
  
• Friedman Billings downgraded shares of Legg Mason (NYSE: LM) to Underperform from Market Perform on liquidity concerns given the Legg Mason's leveraged balance sheet and falling EBITDA. The firm lowered their target to $7 from $11.

Abercrombie & Fitch Co. (NYSE: ANF), the hip clothing store that competes with The Gap, Inc. (NYSE: GPS) and J.C. Penney Company, Inc. (NYSE: JCP), is no different than any other retailer. Christmas is going to hurt... hurt bad. Make no mistake. And as far as earnings reports goes, the pattern is in: report a decline, then issue some nasty guidance.

Abercrombie reported Q3 numbers today, and according to the press release, net sales decreased 8%, and earnings per diluted share declined 44% to $0.72. As Melly Alazraki reported this morning, that $0.72 beat analyst estimates. But the market could care less. As Melly pointed out, the full-year outlook was cut. The stock sold off upon the news. In fact, as I write this, the stock is down nearly 15%. By the way, if by the time this is published the market is up and Abercrombie's shares are trading in the green (big if, granted), don't even think it's a buy. Put that out of your mind. Did you see the same-store sales? They were down 14% for the quarter. That figure is grabbing the attention of investors, I'm sure. When you see a downturn like that, well, you know things aren't going to turn around quickly.

Abercrombie's woes will be with it for a while. Management will find it difficult to strike the right balance between staffing the stores properly and increasing marketing activities. All retailers will be in the same boat. The stock hit a new 52-week low today of $18.83. My guess is that the stock will be as volatile as the market, and that it will trend in a downward direction over the next couple months. Obviously I don't think it's a buy. Broken stock and broken fundamentals aren't a great combo. Abercrombie continues to plan for new store openings in fiscal 2008; perhaps those investments will pay off down the line. For now, the retail sector is doing horribly, competition in the sector is becoming cutthroat as consumer confidence loses value, and I continue to look at only two names -- Wal-Mart (NYSE: WMT) and Target (NYSE: TGT) -- as possible long-term values. Yep, Abercrombie & Fitch isn't so sexy anymore.

Disclosure: I don't own any company mentioned; positions can change at any time.

Abercrombie & Fitch (NYSE: ANF) apparently faces some major image issues.

According to a September ChangeWave survey of more than 4,000 consumers, Abercrombie was the store they said they're least likely to shop at in the future.

Consumers primarily objected to the company's risqué self-portrayal. One respondent took them to task for "immoral advertising and the message it sends to teens."

Other disaffected responses include:

• "Seriously disagree with their philosophy."
• "Overly suggestive catalog."
• "Don't like their advertising scheme."
• "Moral values."
• "I don't like the image they project."

Compounding the image issue is the huge pullback in consumer spending and the migration of consumers from mall stores to discounter retailers.

Aeropostale (NYSE: ARO), a retailer whose colleagues include Abercrombie & Fitch (NYSE: ANF), Pacific Sunwear of California (NASDAQ: PSUN) and Gap (NYSE: GPS), issued its Q2 report on Thursday. The stock didn't do much after the numbers were made public despite reporting a very nice 21% increase in sales during Q2, and a whopping 63% jump in earnings per diluted share to 31 cents. Why such a blasé reaction? Well, the retailer was only able to match the expectations of Wall Street analysts, so that might offer some justification for the lack of a decisive bid.

I felt the same way after reading Aeropostale's earnings release as I did after perusing the stats behind GameStop's (NYSE: GME) recent quarter, thinking the company deserved at least a little excitement, especially when one considers that last year at this time, the mall chain saw a 4% contraction in same-store sales. Of course, there is one understandable difference between the GameStop situation and the Aeropostale scenario. GameStop's stock wasn't trading near a 52-week high, and Aeropostale's shares are. So, perhaps the market is perceiving that a lot of the good news is already priced in.

Aeropostale has done well this year. Its stock is up over 28%. Should that concern potential investors? Perhaps. After all, this is a mall retailer based on fashion and investors must consider that Aeropostale's current hot streak could cool. If that happens, the stock might end up retreating back to the lower end of its 52-week range. While there are any signs that such a retreat will happen, I only want to throw into the discussion the concept of fickleness among the youth.

If you really like Aeropostale and want to buy its stock, it might not be so bad to wait for a better price, in my opinion, to allow at least a little margin for error.

Disclosure: I don't own any company mentioned; positions can change at any time.

• Digital Angel (AMEX: DOC) to hold company update conference call at 8:30 a.m.
• Hewlett-Packard (NASDAQ: HPQ) to report Q4 earnings; conference call at 5 p.m.

• Freddie Mac (NYSE: FRE) to report Q3 earnings; conference call at 10 a.m.
• Target Corporation (NYSE: TGT) to report Q3 earnings; conference call at 10:30 a.m.

• Abercrombie & Fitch (NYSE: ANF) to report Q3 earnings; conference call at 8:30 a.m.
• Deere (NYSE: DE) to report Q4 earnings; conference call at 10 a.m.
• Gap (NYSE: GPS) to report Q3 earnings; conference call at 10:30 a.m.

• Thanksgiving Holiday

• Black Friday
• PDUFA date for Biomarin (NASDAQ: BMRN)'s Kuvan, formerly Phenoptin, for treatment of Phenylketonuria.