Is the worst over for retail? Do investors believe most fashion and retail shares have hit bottom and it’s time to dip their toes back into the sector? Are they looking at retail and apparel firms differently?
At a Nomura Instinet Retail Roundtable last week, analyst Simeon Siegel pointed to how Under Armour Inc.’s stock fell last month when it missed third-quarter sales projections, and how shares of Michael Kors Holdings Ltd. earlier this month jumped after its second quarter bested Wall Street’s estimates and the company raised its fiscal-year outlook. He said it appears investors are “starting to look more at the business,” referring to the underlying fundamentals of a company.
The analyst also said much of the improvement in earnings reports in the third quarter appear to be due to better inventory management. That in turn has helped with gross margins, which are helped by more full-price sales and less leftover merchandise that needs to be marked down.
While Siegel said most firms seem to have cleared out the right amount of excess inventory, he also said one should continue to keep an eye on inventory levels because that will tell down the road whether there’s been a correct pullback by a company or whether in some cases the levels are still not down to where they should be.
The shares of most fashion and retail companies ended Friday’s trading session up as they head into this week where all of the attention will be focused on the upcoming Black Friday to Cyber Monday selling period.
Friday’s big gainer was shares of Abercrombie & Fitch, which climbed 23.9 percent to close at $15.55 in trading after the company posted adjusted EPS of 30 cents for the quarter ended Oct. 28, on sales that rose 4.5 percent to $859.1 million. Overall, comparable sales gained 4 percent, with Hollister up 8 percent and Abercrombie down 2 percent. Wall Street was expecting 22 cents on sales of $818.9 million. The company’s chief executive officer Fran Horowitz said there are signs of stabilization at its Abercrombie brand. The company also raised its capital expenditures for the fiscal year by $10 million to $110 million.
Earlier in the week, Wal-Mart Stores Inc. rocketed to an all-time high after strong earnings, and extremely positive e-commerce sales growth.
On Friday, shares of Ross Stores jumped 10 percent to $72.25, while its off-price competitor TJX Cos. also saw gains, up 2.8 percent to $71.02. Another retailer whose stock did well was Stein Mart Inc., up 7.6 percent to $1.14. A day earlier, when it reported third-quarter results, ceo Hunt Hawkins said its “average store inventories were 20 percent lower than a year ago.”
Other retailers that saw their shares rise were: Ascena Retail Group Inc., up 7.1 percent to $2.25; Gap Inc., up 7 percent to $29.40; American Eagle Outfitters Inc., up 6.9 percent to $14.93; Urban Outfitters Inc., up 5.5 percent to $27.90; Target Corp., also up 5.5 percent to $58.14; J.C. Penney Co., up 4.1 percent to $3.29 and Kohl’s Corp., up 3.5 percent to $43.72.
Among the fashion vendors that saw share gains were: Vera Bradley Inc., up 9.5 percent to $8.29; Guess Inc., up 4.9 percent to $17.66; G-III Apparel Group Ltd., up 4.9 percent to $26.72; Fossil Group Inc., up 4.3 percent to $7.95; Francesca’s Holdings Corp., up 4.7 percent to $7.43, and Nike Inc., up 3.4 percent to $59.19.