With a host of economic news hitting the wire this week, November same store sales are going to capture their fair share of attention on Thursday. As the market starts to digest a furry of preview reports by the sell-side, the positioning and re-positioning in retailers and brands are in full force.
A big theme surfacing that needs to be digested is the level of discounting that was needed to drive traffic and the eagerness to pull the promotional trigger earlier and heavier this year. The good news is that traffic and conversions seem to have come through based on industry data that has been reported so far. Keep in mind that weather was favorable for the first part of November as well, which likely pushed the group above planned heading into Black Friday.
The retail group has been trading up for the last 4 weeks, with the S&P Retail Index (RLX) up 6% vs. the S&P 500 around 0.5%, and the Dow basically flat. Retailers started to pull away from the broader market around the middle of November and the timing of this move should be noted.
Based on the directional move of the group and the favorable reports that have been circulating through Wall Street, it seems that retailers are set to post respectable same store sales for November. Our recent screen of apparel and specialty retail names based on performance and valuation highlight: Aeropostale (NYSE:ARO); Gap (NYSE:GPS); Dress Barn (DBRN); Finish Line (NASDAQ:FINL); Jo-Ann Stores (NYSE:JAS); and Kohl’s (NYSE:KSS).
From a valuation perspective, Aeropostale is one of the cheaper stocks in the apparel group, trading at 9.7x NYE with over $3 in cash per share. We note that American Eagle (NYSE:AEO), Buckle (NYSE:BKE), and others trade around 14x or higher. ARO has a short interest of 7.7% and the stock is up 18% YTD vs. the XRT 32%.
Disclosure: Author is long GPS, KSS, DBRN, FINL, SCVL, ARO, JAS, and KSS at the time this article was posted.