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VIDEOTrendspotting: Investing in the Fall Fashion Season
By
Carol Kopp
Aug 12, 2010 9:50 am
Fall shopping season is just around the corner, but which brands and stores will get the business?
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This isn't a non sequitur. Fall means clothes shopping; for kids going back to school, for teens who are fashion-conscious, and for grown-up women who care about appearances -- and none of the above think sackcloth is a good look.
In the midst of extraordinary uncertainty and conflicting signals about everything economic, there are a couple of interesting signals about what female consumers are thinking right now.
In one, a Citigroup survey shows that women are significantly more optimistic than men about the chances that the economy will continue to improve next year. And although both men and women think it could take a couple more years for the economy to get back to “normal,” women are relatively upbeat and patient about that, compared to men. In effect, as a Wall Street Journal blog points out, this is a “Venus-Mars” spat, and it will be settled by women, because they do most of the household shopping.
The second signal, also from a Citigroup survey, concludes that 41% of Americans plan to spend less than last year on back-to-school purchases, and 32% will spend less than $100 total on them, compared with only 21% who said that last year.
There are plenty of other signals pointing in any and all directions out there, but let’s stick with these. Even though weekly reports showed that retail sales in July and early August were sluggish, they'll pick up in the weeks to come, and the only question is which brands and stores will get the fall business.
There’s a serious disconnect between Wall Street analyst opinion about retail stocks and the real world that women live in. A middle-class American woman living in the suburbs today is surrounded by name brands like Christopher & Banks (CBK), Coldwater Creek (CWTR), Talbots (TLB), Ann Taylor (ANN), and Chico’s (CHS). For younger women, the scenery is dominated by other names like Aeropostale (ARO), Hot Topic (HOTT), and American Eagle Outfitters (AEO). On Wall Street, many of these are close to penny-stock territory now, languishing below $10 a share. The whole sector is poison, according to many analysts.
Maybe it is, compared to 1999, but some are a little better than others -- a fact that's appreciated by the women who shop at them but not by the analysts, who pore over balance sheets but probably wouldn’t be caught dead in a Chico’s even if they knew how to find one.
So, here are a few guesses on how well they'll do in the next couple of months, based on the quality of their goods, the ambiance of their stores, and the professionalism of their sales people.
Coldwater Creek is probably the best of the bunch, with a wide range of merchandise and big, fresh-looking stores. Not coincidentally, it’s the best performer lately among the beleaguered “apparel” stocks, although at about $4 it’s less than half its 52-week high.
Christopher & Banks is appealing, particularly to business women. Its latest report beat earnings expectations, and it pays a 3.7% dividend.
Chico’s is as good or better than most. Fairly recently it was an analysts’ darling, but it just landed on Goldman Sachs’ Conviction Sell list, which pretty much dissed the whole retail environment. Chico’s pays a 1.78% dividend.
On the other hand, Talbots stores are dreary and dowdy, and so is their merchandise. There’s enthusiasm on Wall Street about this company, based on its new management team. But so far, it seems mostly to have cut costs, not improved stores or goods.
Ann Taylor is the oddest of the bunch from a shopper’s viewpoint, because it changes direction so often that its management team must be either constantly in upheaval or suffering from multiple-personality disorder. At the moment, though, it’s looking pretty good, but maybe not good enough against its competition.
The stores that aim squarely at the younger woman -- like Aeropostale and American Eagle -- probably should be in the doghouse for now. No matter how attractive their merchandise is, they sell mostly leisure clothes, which aren't a priority when money is tight, and they sell them to young women, who are having a tougher time than most these days. Finally, there are the preteen and teen consumers, and the best advice you can have on them is: Don’t believe anything anybody says. Illustration: Which of these new fashion lines for young girls would you put your money on: “Britney [Spears] for Candies,” exclusively at Kohl’s (KSS); “The Miley Cyrus & Max Azria Collection” for Walmart (WMT); “6126 by Lindsay Lohan” at Neiman Marcus, or “Material Girl” by Madonna and her daughter at Macy's (M)? No sane adult could possibly understand the thought process that goes into such consumer choices.
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No positions in stocks mentioned.
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