As students gear up to head back to school, some retailers are better positioned than others to benefit from the rise in consumer spending, according to Cowen. Retailers are wrapping up a mixed second-quarter earnings season as they head into September. On the one hand, they’re dealing with excess inventory that is necessitating deeper promotions. On the other hand, there are some signs that consumers are more stable than feared. Still, companies that offer parents a broad assortment of goods, or focus on recession-resilient categories, will come out on top even if overall spending will be lower, according to a Thursday report from the investment bank. “We have optimism since parents need to refresh closets for a return to school; however, retail is over inventoried, inflation is taking wallet share & we see higher promos,” Cowen analyst Oliver Chen wrote. “Cowen forecasts spending down (1)-(2)% Y/Y vs. NRF’s (0.5)% Y/Y.” The analyst named Target a top pick for back to school after an “encouraging” start to the season that showed an improvement from the prior year. The big-box retailer struggled in its second quarter , missing earnings expectations by a wide margin after marking down unwanted merchandise. Still, Cowen analysts emphasized the “potential for continued strength in long-term business model characteristics” as Target continues to make progress on private label. “We prefer retailers such as TGT that remain focused on value and have strong private label and back-to-school assortments,” read the note. Ulta is another favorite idea for investors as the “overall resilience” of the beauty category will get an added boost from the going-out and self-care trends. Consumers are determined to travel and attend events after being cloistered indoors because of the pandemic. Additionally, the report read: “We see competitive advantages in a broad price range across a large customer base and favor ULTA’s targeted marketing strategies enabled through a robust loyalty program.” Shares of Ulta are down just 2% this year. Meanwhile, Lululemon is a top idea as the athletic apparel company is expected to have high “durability of growth,” according to the report. “Management sees very strong and healthy demand for the business in Q2 (our digital checks remain positive and stores remain highly full price),” read the note. “We’re modeling Q2 revenue +23% y/y, modestly higher than consensus of +22% and on a three-year stack revenue is modeled up 102% vs 106% in Q1.” Cowen also considers footwear company Deckers a top pick. Its brands Ugg and Hoka are “relative winners into back to school,” particularly Hoka. The analyst said Hoka’s guidance for 40% revenue growth “could prove conservative if current momentum continues.”