J. Crew climbs as analyst lifts to 'Outperform'

NEW YORK (AP) — Shares of J. Crew Group Inc. surged Tuesday, getting a boost from a ratings upgrade and price target increase.

BMO Capital Markets analyst John Morris lifted the retailer to "Outperform" from "Market Perform" and raised his share price target to $35 from $25.

In a client note, Morris said the New York-based company is laying the groundwork for a strong long-term performance partly on signs that its fall merchandise is off to a good start.

"Our sources close to the company also confirm that not only is the merchandise trend-right, but it is differentiated to the competition - a major positive," the analyst wrote.

The recession and budget-conscious shoppers have also led many department stores to play it safe, giving J. Crew a chance to eat into market share, Morris explained.

"We think J. Crew is getting the benefit of shoppers veering away from the ultra luxe high-end department stores in favor of J. Crew's more affordable wares in this environment," he said.

Morris raised his second-quarter earnings estimate to 20 cents per share from 12 cents per share. Analysts surveyed by Thomson Reuters, whose estimates normally exclude one-time items, predict profit of 14 cents per share.

J. Crew's stock gained $1.84, or 6.5 percent, to $29.97 in afternoon trading. The shares have traded in a range of $8.02 to $38 over the last year.