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Here is a list of retail stocks that have seen inventories grow faster than revenues during the most recent quarter, an accounting trend that might raise a flag for some investors.

When a company's inventories are rising at a faster rate than its sales, it may indicate that the company is having trouble selling its merchandise. In extreme cases, the company might have to mark down the value of its inventory.

But there are often good explanations for a deviation between inventory and sales growth. Use this list as a starting point for your own analysis--check out the 10-Q and related management discussions to see if there's a good explanation for this trend.

Accounting data sourced from Google Finance, short float and performance data sourced from Finviz.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research. Note: The numbers on top of items represent the forward P/E ratio, if available.


The list has been sorted by the difference between revenue and inventory growth rates. All values based on the most recent quarter, comparing to last year's corresponding quarter.

1. Maidenform Brands, Inc. (NYSE:MFB):
Apparel Clothing Industry. Market cap of $619.04M.

Revenue grew at 13.27% on a y/y basis, while inventory grew at 69.94%. Inventory, as a percentage of current assets, increased from 28.47% to 40.00% (comparing the 13 weeks ending 2009-10-03 vs. 13 weeks ending 2010-10-02). Short float at 7.37%, which implies a short ratio of 6.63 days. The stock has gained 82.51% over the last year.

Other Highlights:

- The company's capital spending accelerated by 17.24% over the last five years, much faster than the industry average of 7.13%. At least theoretically, this makes them more competitive over the coming years, since their operational assets are more up-to-date.

- The company outperformed analyst earnings estimates during the most recent quarter, suggesting that the analyst community is underestimating the stock. The company reported earnings per share of $0.55 per share, and exceeded the First Call Consensus of $0.53 (Q3 Earnings on 11/10/10). The company also outperformed analyst estimates over the last year, reporting earnings per share at $1.30, beating the consensus view at $1.19 (based on the estimates of 2 analysts).

2. G-III Apparel Group, Ltd. (NASDAQ:GIII): Apparel Clothing Industry. Market cap of $714.68M.

Revenue grew at 23.78% on a y/y basis, while inventory grew at 64.06%. Inventory, as a percentage of current assets, increased from 32.02% to 38.33% (comparing the 3 months ending 2009-10-31 vs. 3 months ending 2010-10-31). Short float at 9.82%, which implies a short ratio of 7.34 days. The stock has gained 97.92% over the last year.

Other Highlights:


- When comparing the company's price relative to earnings, it's clearly undervalued. The P/E ratio, based on the most recent quarter's earnings, stands at 4.29, lower than the industry average at 19.26, while the P/E ratio, based on trailing twelve month earnings, stands at 13.56, which is lower than the industry average at 16.8. The company also appears to be undervalued relative to projected earnings growth. PEG ratio at 0.78, vs. an industry average at 2.09.

-Institutional and mutual fund investors have been net purchasers of the company's shares over the last two quarters, suggesting that the smart money thinks there's more upside to the stock. Institutional investors have been net buyers of 104.6K shares during the most recent quarter, vs. 671.4K net shares purchased in the previous quarter. Mutual fund investors have also been optimistic on the stock. They were net buyers of 943.0K shares during the most recent quarter, vs. 1.5M net shares purchased in the previous quarter.

3. Skechers USA Inc. (NYSE:SKX):
Apparel Footwear & Accessories Industry. Market cap of $1.12B.

Revenue grew at 36.82% on a y/y basis, while inventory grew at 70.29%. Inventory, as a percentage of current assets, increased from 26.45% to 35.43% (comparing the 3 months ending 2009-09-30 vs. 3 months ending 2010-09-30). Short float at 19.11%, which implies a short ratio of 4.91 days. The stock has lost -15.92% over the last year.

Other Highlights:

- Judging by the company's cash holdings, shares look to offer good value at current levels. Price / Cashflow per Share, based on the most recent quarter's cash flow numbers, came in at 6.41, lower than the industry average of 15.65. It's also worth pointing out that the company's trailing twelve month Price / Cashflow per Share came in at 5.98, lower than the industry average of 18.39.

4. Phillips-Van Heusen Corp. (NYSE:PVH): Apparel Clothing Industry. Market cap of $4.24B.

Revenue grew at 117.43% on a y/y basis, while inventory grew at 143.78%. Inventory, as a percentage of current assets, increased from 29.43% to 35.89% (comparing the 13 weeks ending 2009-11-01 vs. 13 weeks ending 2010-10-31). Short float at 5.79%, which implies a short ratio of 3.74 days. The stock has gained 61.48% over the last year.

Other Highlights:

- Institutional and mutual fund investors have been net purchasers of the company's shares over the last two quarters, suggesting that the smart money thinks there's more upside to the stock. Institutional investors have been net buyers of 1.9M shares during the most recent quarter, vs. 3.9M net shares purchased in the previous quarter. Mutual fund investors have also been optimistic on the stock. They were net buyers of 3.3M shares during the most recent quarter, vs. 694.8K net shares purchased in the previous quarter.

5. True Religion Apparel Inc. (NASDAQ:TRLG): Apparel Clothing Industry. Market cap of $554.26M.

Revenue grew at 12.53% on a y/y basis, while inventory grew at 36.26%. Inventory, as a percentage of current assets, increased from 21.94% to 23.00% (comparing the 3 months ending 2009-09-30 vs. 3 months ending 2010-09-30). Short float at 23.52%, which implies a short ratio of 15.19 days. The stock has gained 15.49% over the last year.

Other Highlights:


-The company's capital spending accelerated by 112.09% over the last five years, much faster than the industry average of 7.13%. At least theoretically, this makes them more competitive over the coming years, since their operational assets are more up-to-date.

- The company has demonstrated rapid cash flow growth over the last five years, which may lower their risk going forward. Five year average cash flow growth at 65.99%, much higher than the industry average at 12.55%.

6. Collective Brands, Inc. (NYSE:PSS): Apparel Stores Industry. Market cap of $1.37B.

Revenue grew at 1.71% on a y/y basis, while inventory grew at 22.15%. Inventory, as a percentage of current assets, increased from 37.83% to 45.85% (comparing the 13 weeks ending 2009-10-31 vs. 13 weeks ending 2010-10-30). Short float at 17.08%, which implies a short ratio of 8.23 days. The stock has gained 10% over the last year.

Other Highlights:

- Judging by the company's cash holdings, shares look to offer good value at current levels. Price / Cashflow per Share, based on the most recent quarter's cash flow numbers, came in at 4.17, lower than the industry average of 12.21. It's also worth pointing out that the company's trailing twelve month Price / Cashflow per Share came in at 5.6, lower than the industry average of 11.84.

7. Perry Ellis International Inc. (NASDAQ:PERY):
Apparel Clothing Industry. Market cap of $415.43M.

Revenue grew at 12.73% on a y/y basis, while inventory grew at 31.35%. Inventory, as a percentage of current assets, increased from 35.39% to 45.37% (comparing the 3 months ending 2009-10-31 vs. 3 months ending 2010-10-30). Short float at 4.57%, which implies a short ratio of 5.32 days. The stock has gained 94.06% over the last year.

Other Highlights:


- Institutional and mutual fund investors have been net purchasers of the company's shares over the last two quarters, suggesting that the smart money thinks there's more upside to the stock. Institutional investors have been net buyers of 433.8K shares during the most recent quarter, vs. 54.1K net shares purchased in the previous quarter. Mutual fund investors have also been optimistic on the stock. They were net buyers of 76.2K shares during the most recent quarter, vs. 110.7K net shares purchased in the previous quarter.

8. Steven Madden, Ltd. (NASDAQ:SHOO): Apparel Footwear & Accessories Industry. Market cap of $1.19B.

Revenue grew at 31.38% on a y/y basis, while inventory grew at 49.87%. Inventory, as a percentage of current assets, increased from 16.26% to 21.28% (comparing the 3 months ending 2009-09-30 vs. 3 months ending 2010-09-30). Short float at 7.68%, which implies a short ratio of 5.32 days. The stock has gained 64.35% over the last year.

Other Highlights:


- Over the last year, the company has proven itself to be more profitable than its industry competitors. Trailing twelve month (TTM) gross margin at 45.56%, lower than the industry average at 53.1%. TTM EBITD margin at 19.74% vs. industry average at 16.54%, while TTM operating margin came in at 18.2%, higher than the industry average at 16.43%. The company also outperformed with its pretax margin, reporting a ratio of 18.68%, higher than the industry average at 15.55%.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Accounting Flags: 8 Retail Stocks With Rising Inventories