Fashion apparel and accessories can be a lucrative investment sector if you research well before and pick the right companies. This sector can be fickle due to not only being affected by traditional underlying forces but also due to consumer taste and trends. A brand that is very popular one year can very well be put aside for another, very quickly, according to what is considered “in”.
Reputation and image is very important for the performance of retail stocks. There are a few metrics that you can use to gauge a brand including same store sales growth and gross margins.
Other risks to consider include the on-going trade war between the US and China that will include a further tariff on $60 billion of goods including categories that will affect Fashion stocks. The new tariffs will come into effect in June.
RYU Apparel Inc. (RYU-X)
A largely Canadian fitness apparel company that also has a presence in the US. They are strengthening their ecommerce and online presence. They are a fairly new company, trading for under 5 years. Currently, they are in their growth stage.
A fairly new start-up company. Management has worked for different apparel companies in the past. Doesn’t follow this closely. They are billing themselves as kind of an upstart between Under Armour (UA-N) and Lululemon Athletica (LULU-Q) in that they have athletic wear for both women and men. Hasn’t done a lot of work on this,…
Gildan Activewear Inc. (GIL-T)
A part Canadian and American manufacturer of unbranded clothing. They manufacture branded apparel on behalf of clients and businesses. The latest report has shown that they have great cash flow and are buying back stocks. A dividend increase has also been announced.
He would be wary of this stock. They have had a pattern of disappointing earnings, and not likely out of the woods yet. There is political unrest in Nicaragua where they operate.
Le Chateau Inc. (A) (CTU-X)
A Montreal based specialty retailer. They are known for their contemporary designed clothing. A financing agreement of $1M was announced in February for working capital purposes.
Current inventories are selling very well and profits are very large. Stock has been off the map but is now rising. Selling at 6/7 X this year's earnings.
Canada Goose Holdings (GOOS-T)
A Canadian luxury winter apparel maker. Their coats are priced in the thousands. It’s a little expensive now with 40x valuation but they have a history of breaking earnings forecasts. They are expanding globally and are enjoying growing sales.
A good trend with an uptrend. Support is at $50 and he expects testing at $60. But it is enjoying higher highs and lows.
Reitmans (Canada) Ltd. (A) (RET.A-T)
Brands under them include Reitmans, RW & CO and Penningtons. Tax loss selling affected them but they have been a steady name. They have been closing their worst stores. Some buy this just for the dividend, which is at 5.99%.
They are sound financially and always have been. They are hurting from foreign competition. Same store sales are down and they are trying to manage the decline. He would not step in here. Even a good management team is struggling.
Aritzia Inc. (ATZ-T)
A Canadian women’s fashion brand out of Vancouver. They have been experiencing good growth and are expanding in the US where brand recognition is high too. Their online presence is strong and investors are keeping a close eye for its potential.
He likes this. Every time he goes to the mall, these stores are full, while competitors’ stores are empty. It was probably priced aggressively when it was sold to the market, because it was an exciting growth story. Then we got into Amazon, and everybody hates retail, which is what has really hammered this company.…
Macys Inc. (formerly Federated Department Stores) (M-N)
Big box stores have been facing increased headwinds from ecommerce and changing consumer patterns. Macys has been the better of the bunch in cost reduction and doing online business but there is vulnerability to Amazon and other online competitors.
Wouldn’t invest in this for the long-term, because the headwind of Department stores or brick-and-mortar type retailers is severe. People are getting involved with the ease of online shopping and its cost effectiveness.
Ross Stores Inc. (ROST-Q)
The second largest off-price retailer after TJX. They buy excess inventories from more recognized brands and acts as an outlet. When traditional retail companies aren’t doing well, these companies will do better. It was one of the only stocks to have a positive rate of return in 2008.
Off channel retailer. Sell at deep discounts. Nicely positioned to benefit from consumers desire to wear brand name clothing at a discount.
Nordstrom Inc (JWN-N)
A chain of luxury department stores. They have a good presence in online retail and their ecommerce store is one of the best in the luxury space. Investors are expecting another strong earnings report since they have a history of beating expectations.
Chico’s FAS (CHS-N)
A women’s fashion retailer. Sycamore Partners has submitted an offer to purchase the entirety of the business for $3.50 per share. A previous offer for purchase at $4.30 was offered but rejected by the board since they saw the offer undervaluing the company.
A major player in retail with brands such as Old Navy, Gap, Banana Republic under them. They are reporting first quarter earnings on May 30, 2019. They are suffering from the general trend away from brick and mortar stores. A longer-term survivor.
Tapestry Inc. (TPR-N)
Coach, Kate Spade and Stuart Weitzman are key labels under Tapestry Inc. They renovated much of their physical stores are starting to see a revival in the Coach brand. The share buyback program is going well as planned.
Still a great company. This was such a great story for the longest time. From what he understands, their issue is that to some degree they have diluted their brand. Counterfeiting of Coach is rampant in Asia. They have also been known to do very large sales on their goods, which has cheapened their cachet.…
DSW Inc (DSW-N)
A footwear retailer. They performed some acquisitions and are opening stores globally. Same-store sales rose more than 5% in the latest report. They have a good history of raising dividends and it currently sits at 4.5%.
Shoe retailer. This is a challenging business. There is lots of competition and more and more online presence. This is a value play. On a valuation basis, this stock is cheap. They have been getting rid of the large store fronts that were 20,000-24,000 ft.² and are basically cutting them in half. Dividend yield of…
Michael Kors Holdings (KORS-N)
They changed their name to Capri Holdings Limited (CPRI-N) in January of this year. They have Versace and Jimmy Choo under them and are looking to bolster their operations through the various brands. Their original brand, Michael Kors, has had trouble growing sales and maintaining status and image.
New Position for him that has done extremely well so far. Affordable luxury segment, competing directly with Coach. International opportunity is in the early innings. They can really grow from here. Cheaper than coach at this point.
American Eagle Outfitters (AEO-N)
An American clothing and accessories retailer that focuses on the teen to young adult segment. They are focusing on expanding online retail and investors are beginning to put more confidence behind this company. They have grown 6.2% year-to-date compared to the industry’s 4.3% decline.
One of the better retailers, but if consumers stop spending, they would get hurt harder and faster because they are more of a niche product. Have done extremely well in opening stores and branding their name.
Guess Inc (GES-N)
An apparel and accessories company that has been gaining interest from hedge funds and other investors. They are starting to repurchase their common stock and are redistributing capital. They recently cut their dividends in favour of the buyback plan.
Retailer and the catalyst is their international operations. Growing very rapidly. In 2005 20% of revenues came from outside of North America but last year 50% came from outside. 388 stores in Europe and Middle East. Their 5 year plan is to have 900 stores.
Nike Inc (NKE-N)
A spectacular growth story with global presence. Revenues from China grew well and have not been affected as much by the US-China dispute. Consumer confidence must be closely monitored since this company is particularly vulnerable to be hit if it falls.
A company he admires, but bad news keeps coming out. They were very reliant on retail channels which no longer have the footfall they used to. They are under-indexed to online, which is where more and more demand for soft goods is going. Their quarters for many years have shown inventory issues. Feels they have…
L Brands Inc. (LB-N)
Flagship brands under them include Victoria’s Secret and Bath & Body Work. The tariff war has hit these brands particularly hard. It is a high quality brand but is facing increasing pressure from other online retailers.
They are in great areas and saw great growth in execution. Better economic numbers and wage growth in the US is positive. LB-N has been one of the better performers over the last year or so. There is a concern about how long they can keep up the growth.
Abercrombie & Fitch (ANF-N)
A wildly volatile stock. They recently cut their COO position and some have questioned their accounting practices. A stock to watch but beware and do your due diligence.
Tiffany & Co. New (TIF-N)
A luxury jewelry and specialty retailer famous for their diamonds and sterling silver. They were also affected negatively due to the US-China trade war since investors worry that diamonds and jewelry will be included in tariffed goods.
Companies that recover from a recession first are 1) suppliers of necessities such as pipelines, telcos and utilities 2) blue-chip banks, insurers 3) consumer durables and 4) finally consumer luxuries.
Under Armour (UA-N)
A sports and casual wear manufacturer. They are nearing the end of a three year transformation. They are particularly popular due to the athleisure movement and demand for smart looking workout clothing.
A higher growth story, but the whole group is at a valuation premium. Although the company is doing well today, if the growth model and valuations don’t come through, you are paying a lot today for what the company looks like a few years from now. That always makes her nervous in protecting capital.
LuLulemon Athletica (US) (LULU-Q)
A Canadian company trading on the NASDAQ. They have gotten support for their athleisure and fashion forward apparel. The major bulk of their clientele are discerning millennial shoppers looking for good quality apparel.
(A Top Pick Sept 15/15. Up 28.61%.) This has had a history of being the finest in the line of fit ware. It has an unusual model, in that it hasn’t actually flooded the world with stores. He thinks this company is unassailable. Sold his holdings in order to move into something else.
Urban Outfitters (URBN-Q)
An American multinational consumer goods and apparel company. They announced strong results in the holiday quarter and are expected to announce their Q1 earnings on May 21.
TJX Companies (TJX-N)
The largest international apparel and home fashion off-price retailer. They change inventory quickly and are good at keeping up with consumer taste. In a recession environment, these types of companies thrive. Their brands include Marshalls, Winners and Home Senses.
One of her favourite retailers. A little pricey when it comes to valuations, but they are the one retailer that really has been able to have consistent same-store sales growth. As a brick/mortar store one thing they have done really well is coming up with an advertising campaign that makes shopping an experience. It advertises…
A leading undergarments and athletic apparel manufacturer. They posted the highest quarterly sales growth in eight years for the fiscal year 2018. Champion, one of their brands, has been growing internationally and is expected to continue its expansion.
Has an aversion in general to retail, but if he were going to buy retail stock, he would rather buy a manufacturer. Retail does poorly in a recession, and it tends to be cyclical. This one is not much of a global player, and a play that should be successful in a declining US$, which…
Carter’s Inc (CRI-N)
A children’s apparel company that supplies a lot of discount retailers under different names. Earnings were impacted by unfavourable currency rates and soft sales. However, a large majority of mothers shop at their stores and they are opening more stores than they are closing.
80% of new moms shop at this store. The big push for this company is being able to drive international sales. Right now 90% of their sales are in the US. Management initiated a dividend in 2013, and at the top of every year have been increasing it. The most recent one was a 19%…
LVMH (Moet Hennessy Louis Vuitton) (LVMUY-OTC)
The biggest luxury-goods company in the world. It’s a good name to be defensive during the US-China tariff war as this is not expected to affect LVMH. High-end retail continues to do well and they are doing a great job with online commerce. A good stock to hold long term.
Paris based luxury goods company. If not the largest, it is one of the largest globally. Two businesses drive this stock. The drinks business, basically champagne in Cognac, as well as the fashion and leather goods business such as handbags, shirts, etc. Those 2 divisions are 75% of earnings before interest and tax. Cognac is…