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HBC shares jump on bullish review

HBC shares rose $ 0.55 on Friday after receiving the enthusiastic endorsement of retail analysts at RBC Capital Markets.

The stock closed at $ 17.05 per share, finally climbing above the issue price of $ 17 set in November.

Citing above-average growth potential, a unique and low-cost retail footprint, solid free cash flow for reinvestment or dividends and potential for returns to shareholders through monetization of real estate, analysts Tal Woolley and Irene Nattel set a price target of $ 21.

They also pointed to strong management under CEO Richard Baker and president Bonnie Brooks, stable gross margins in the 40 per cent range and forecasted EBITDA growth of 35 per cent in 2013 and 18 per cent in 2014.

“HBC shares offer exposure to a turnaround story that has started promisingly,” according to the research sent to investors on Friday.

RBC Capital Markets helped lead the syndicate of underwriters that handled the HBC IPO in November.

HBC includes Bay stores and Home Outfitters in Canada and Lord & Taylor department stores in the U.S.

“I’ve been bullish on Bonnie for quite some time,” said retail consultant Wendy Evans. “She is a terrific merchant. She understands the editing of the branding they so badly needed.”

“The downside is now Bonnie is looking after Lord & Taylor. Are they spreading their senior management too thin?”

She said HBC still has challenges to meet before American department store retailer Nordstrom arrives in 2014, including updating some of the smaller stores and improving customer service. “It’s a race against time. It will be interesting to see.”

Evans pointed out that Brooks has experience competing with Nordstrom in the U.S., with Lord & Taylor. And Nordstrom, which differentiates itself on customer service, isn’t able to meet that target in every store all the time.

“Generally I have to say I like them, but they’re not all great,” said Evans.

thestar.com – Business