Colorado Group, the Australian value apparel and footwear retailer, saw shares rise eight per cent yesterday, the Tasmania Mercury said.

The retailer continues to woo analysts, who upgraded the stock on the basis of a positive outlook despite first half earnings coming in at lower than last year's figures. Value chains such as Colorado and Globe International are riding high on the expectation that the retail sector will lead the way out of the poor economic environment in the next six months.

ABN Amro Morgans analyst Michael Johnston said the company's shares remained inexpensive on both a relative and fundamental basis, with a potential value of up to $2.41 a share.

Mr Johnston said the company's under-geared balance sheet, despite the recent $14m takeover of Palmer Corp, provided scope for further acquisitions.

"Colorado has a healthy cash flow, strong brands and has huge potential for further cost savings to complement the company's store roll out program," Mr Johnston said.

"A return to normal consumer spending patterns post-GST aided by a recovery in broader economic conditions in the second half of calendar 2001 and a higher US dollar exchange rate should lead to a rerating."