UPDATE 1-Goldman cuts US department-store sector to neutral

(Adds details; changes source)

May 16 (Reuters) - Goldman Sachs downgraded the U.S.
department-store sector to "neutral" from "attractive," saying
higher gasoline prices should further crowd out consumer
discretionary spending.

Goldman said it recently raised its 2008 oil price forecast
to $149 per barrel, from $115 per barrel.

"Higher energy spending in the second half is likely
setting the stage for a more challenging backdrop for consumer
discretionary sectors, particularly for the department-store
stocks," the brokerage said in a note to clients.

Goldman downgraded JC Penny Co Inc (JCP.N: Quote, Profile, Research, Stock Buzz) and Nordstrom
Inc (JWN.N: Quote, Profile, Research, Stock Buzz) to "neutral" from "buy," saying expansion efforts
and product launches have placed them at a near-term
disadvantage regarding inventory and expense management.

Both carry more near-term earnings risk than peers Kohl's
Corp (KSS.N: Quote, Profile, Research, Stock Buzz) and Macys Inc (M.N: Quote, Profile, Research, Stock Buzz), the brokerage added.

But Goldman upgraded TJX Cos Inc (TJX.N: Quote, Profile, Research, Stock Buzz) to "buy" from
"neutral," saying, "We expect the company's value proposition,
inventory model, and consistent square footage growth to
deliver sustained EPS growth of +10 percent -outpacing peers
within our coverage universe."

The brokerage removed Kohl's Corp (KSS.N: Quote, Profile, Research, Stock Buzz) from conviction
buy list and added Wal-Mart Stores Inc (WMT.N: Quote, Profile, Research, Stock Buzz) to the list.

The brokerage made the following price target changes to
some of the companies within the sector:
COMPANY RATING PRICE TARGET

CURRENT PRIOR
JC Penny Neutral $45 $49
Nordstrom Neutral $39 $43
Carters Inc Neutral $16 $16.50
Kohl's Corp Buy $53 $56
Macys Inc Buy $27 $30
TJX Cos Buy $36 $33
Wal-Mart Buy $63 $60
(Reporting by Nachiket Kelkar in Bangalore; Editing by Amitha
Rajan)