Are Women's Apparel Stocks Poised to Recover?

Includes: ANN, CHS, JNY, KATE, TLB
by: Stone Fox Capital

This is the second in a series on stock sectors that have yet to recover from their pre-financial crisis levels. The first report focused on domestic steel producers (Are Steel Stocks Poised to Recover?) that aren't anywhere near to recovery levels. I pointed out in that article that a major user of steel such as Caterpillar (NYSE:CAT) has had a fantastic recovery to new highs.

This time, the focus will be on the apparel sector and more importantly mainly women's clothing providers. Many of the high end retail providers such as Ralph Lauren (NYSE:RL) or Coach (NYSE:COH) or V.F. Corp (VF) have rebounded to new highs in 2011, easily surpassing the previous 2006/2007 highs. Whether it's because these companies provide higher end merchandise or focus on items that typically fall into the gift category or maybe it's even more of a focus on men that has helped these retailers; the stocks have all fared much better than the women's apparel sector.

Maybe the above-mentioned companies are just better run. This series isn't attempting to identify the best run companies. In a lot of cases, the market trades all sector stocks together and maybe the above companies have had their cycle while the below ones are ripe for a major recovery.

The women's clothing sector scans a wide swath of retailers, making it very difficult to jumble them all together. After all, I'm sure a lot of Liz Claiborne (LIZ) buyers also desire a Coach purse or a North Face jacket from VF. In general though, the companies below focus on the women's clothing sector and they have just been crushed.

Many consider Liz Claiborne or Talbots (NYSE:TLB) to just be bad operators. Liz Claiborne is in a constant state of repair, while Talbots now trades like a penny stock. Jones Group (NYSE:JNY), on the other hand, is considered a good operator. It originally rebounded from the crisis strongly, but they have completely faded since April 2010. Maybe this provides a glimmer of hope that it's as much a sector issue than company specific. As some competitors go out of business and the focus has moved elsewhere, the opportunity to profit might return within this group of retailers.

This sector peaked in 2006/2007, much earlier than the steel producers that still had bullish action in 2008. So after a very long four to five years, here are the details on a sample of the retailers that have yet to recover anywhere close to the pre-financial crisis highs.

AnnTaylor Stores (NYSE:ANN) operates as a specialty retailer of womens apparel, shoes, and accessories under the Ann Taylor and LOFT brands. AnnTaylor has a market cap of $1.4B with sales forecasted at $2.2B. The stock peaked at $45.15 on October 31, 2006 and now trades around $27.50. AnnTaylor is only down 39%, but it did peak earlier than most in the group.

Chico's FAS (NYSE:CHS) operates a specialty retailer of womens apparel, shoes, and accessories under the brands of Chico's, White House/Black Market, and Soma Intimates. The stock peaked at $49.40 on February 22, 2006 and now trades around $15. Chico's is down 70% even though it peaked a lot earlier than the group.

Jones Group (JNY) engages in the design, marketing, and wholesale of apparel, footwear, and accessories under the brands including Jones New York, Nine West, Anne Kiein, Easy Spirit, and various others. The market cap is currently under $1B, with sales estimated to reach nearly $4B. The stock peaked on January 18, 2007 at $35.54 and currently trades at $10.75 or down 70%.

Liz Claiborne (LIZ) engages in the design and marketing of a range of apparel and accessories under brands such as Juicy Couture, Kate Spade and Lucky Brands, amongst others. The stock has a market cap of only $556M with expected sales of nearly of $2.5B. Liz Claiborne hit a high of $46.84 on February 20, 2007 and currently trades below $6. The stock is down a whopping 87% or a potential 675% gain if it ever regained those lofty numbers.

Talbots (TLB) operates as a specialty retailer and direct marketer of women's apparel, accessories, and shoes under the Talbots name. The market cap is only $265M with expected sales of over $1.1B. The stock actually peaked back in 2000 over $50 and currently trades at only $3.75. The pre-financial crisis peak was on January 20, 2006 at $29.75 or an 87% drop over the last 5 years.

Disclosure: I am long LIZ.

Additional disclosure: Data sourced from Yahoo Finance. The information and data is believed to be accurate, but no guarantees or representations are made. The information contained herein is for informational purposes only and should not be relied upon as advice.