By Andria Cheng

Retail stocks headed higher in early trading Monday, with gainers including Best Buy Co., after the largest U.S. electronics retailer was upgraded to outperform by William Blair & Co.

Best Buy (BBY) shares rose 1.1%. The largest U.S. electronics retailer could reap a seven-percentage-point benefit in domestic comparable-store sales this year from the exit of Circuit City (CCTYQ), which shut its stores on Sunday, analyst Jack Murphy said in his upgrade note. He said the company's efforts to cut operating expenses and capital spending will also help it offset weak consumer demand.

The S&P Retail Index (RLX) rose 0.7% to 230.42. Trading in the sector has been volatile amid investor concerns about the global economic outlook.

Avon Products Inc. (AVP) was cut to underperform from market perform by BMO Capital Markets on Monday. Analyst Connie Maneaty said she's concerned about the beauty company's "outsized exposure" to central and eastern Europe, where the financial crisis has worsened.

The dollar's strength in regions such as Latin America also will dent sales there after they are translated back to the U.S. currency. She cut her price target on the stock to $10 from $24. Avon shares fell 5.7% to $14.79.

AnnTaylor Stores Corp. (ANN) shares tumbled 14%, the second straight sharp decline after the company on Friday posted a bigger-than-expected loss and said it's not giving any profit forecast for the first quarter and for the full year.

Its stock plunged 38% Friday.

Staples Inc. (SPLS) shares were little changed. Collective Brands Inc. (PSS) shares were up 5%. Both are expected to report their quarterly results this week.

-Andria Cheng; 415-439-6400; AskNewswires@dowjones.com