Top stock picks by the analysts are Coach Inc., Dick's SportingGoods, Kohl's and Walgreen Co. Barnes & Noble, Dillard's, GapInc. and Jones Apparel Group were at the bottom of the heap. Thisweek Sachs analysts also downgraded the specialty retail sectorfrom neutral to cautious.

Overall, the retail industry faces a wide range of challenges,they said, including increased energy prices, fallout fromHurricane Katrina, insurance premiums and employee benefit costs."The risks, broadly speaking, outweigh the benefits here," saidMatthew Fassler, a Sachs retail analyst, during a breakfastsession. "Energy prices pose the most potent near-term risk."

But the industry's woes are not real estate issues, said DanielHurwitz, senior executive vice president and chief investmentofficer at Cleveland-based Developers Diversified Realty, the ownerof about 470 North American shopping centers. "I don't think we'resaturated at all," he said during an afternoon session. "I thinkwe're, in many cases, understored."