Back-to-School Retail Winners

Aeropostale (ARO) - A poor man’s version of Abercrombie & Fitch (ANF), ARO has been able to blow away the competition in the mid-tier teen clothing sector. The company saw sales increase by 20% during the second quarter and as parents try to find their demanding teens “fashionable” clothes, ARO will be the destination due to reasonable prices. Stock is currently hitting an all-time high and can be bought on all pullbacks.

Ross Stores (ROST) - The company’s motto is “dress for less” and there will be many parents following the same strategy as they prepare to clothe their children for the upcoming school year. Company has grown sales the last two quarters and earnings per share rose 52% in the second quarter. Similar to ARO, ROST is hitting an all-time high and should be bought on down days only.

Target (TGT) - When it comes to stocking up on school supplies the question is whether shoppers will flock to the large discounters (Target or Wal-Mart (WMT)) or the dollar stores or possibly drug stores such as CVS Caremark (CVS)? The final decision may come down to selection and convenience and I believe Target will come out the winner. Target has the selection, there is a good chance the shopper will already be in the store, and the pricing is attractive. Target also has the allure of low-end designer clothing that beats out Wal-Mart's clothing line.

Best Buy (BBY) - One of the few areas shoppers are expected to increase their spending over last year is on electronics, which are now a necessity for students. Everything from the low-priced laptops to calculators will be flying off the shelves at Best Buy now that there are not many direct competitors. The stock has lagged the market rally the last few months and is due for a breakout.

True Religion (TRLG) - This pick flies in the face of everything I have written up until now. The high-end apparel company is best known for their denim line that can run well over $300 for a pair of jeans. I look at this stock in two ways. One, the demand for high-end fashion continues to live on and TRLG is the best play on teens trying to impress with brand name jeans. Heck, I even own several pairs. Two, the fundamentals at TRLG are mind blowing for their industry; they continue to report growth at both the top and bottom lines.

Urban Outfitters (URBN) - For the late teen and college crowd there is URBN, a store that is more fashion forward, but with prices that are reasonable. The company is also taking advantage of their online sales, seeing 17% growth last quarter. The stock has more than doubled off the March lows, but remains well below the 2008 highs.

Comments

[Matthew Stone]

Good article we are sure to see a boost in discount retails such as (ARO), (TGT) and (URBN) as parents outfit the kids wardrobes for the coming school year. Recession, Job loss, Mounting credit card bills or whatever they will still spend to make sure their children have the latest fashions thus avoiding social ridicule but they need a reasonable price these stores can deliver that plus there on your door step. What more could you want?

2009 Aug 26 07:01 AM

[Ted Hurlbut]

I agree with much of this, although I'm not as confident in the market position of TGT at the moment. ARO, BBY and URBN are all spot on, while TRLG is a reasonable counter-intuitive call. The one that is missing, in my judgment, is The Buckle (BKE). I would anticipate continued good top-line results from them. Otherwise, it looks to be a challenging back half for much of retail.

2009 Aug 26 10:54 AM

[Gary A]

Back to school won't be that great. People are putting pens on layaway at Kmart.

2009 Aug 26 03:10 PM

[TheCaptain]

Too bad you are saying what everyone already knows. What we need to find are those sleepers that no one expects.

2009 Aug 26 03:12 PM

[OceanTiger]

Alwayse buy the best, they rank is as following:
TRLG,ARO,ROST,BBY,WMT,...
by software Trade4Rich.com

2009 Aug 26 07:40 PM

[OceanTiger]

Alwayse buy the best, they rank is as following:
TRLG,ARO,ROST,BBY,WMT,...
by software Trade4Rich.com

2009 Aug 26 07:43 PM

[Matthew D. McCall]

BKE was a consideration, but technically the stock has broken down the last few months as expectations became very high for the company. If the stock can hold $25 I may consider it a buy.


On Aug 26 10:54 AM Ted Hurlbut wrote:

> I agree with much of this, although I'm not as confident in the market
> position of TGT at the moment. ARO, BBY and URBN are all spot on,
> while TRLG is a reasonable counter-intuitive call. The one that is
> missing, in my judgment, is The Buckle (seekingalpha.com/symbo...).
> I would anticipate continued good top-line results from them. Otherwise,
> it looks to be a challenging back half for much of retail.

2009 Aug 27 08:05 AM

[billddrummer]

I've seen upside breakouts at BBY from a personal level (proprietary). The company appears to be successfully competing with TGT and WMT for bargain shoppers.

2009 Aug 31 03:01 PM

[bminfo247]

Check Yahoo Finance for stock picks and information on the current climate with regards to stocks that are dependent on the school cycle:
finance.yahoo.com/news...

2009 Sep 11 10:32 AM