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<< Return to Part II

As we enter into this Christmas season, that can only mean one thing: Shopping. This article is meant to give a personal perspective of how the retail sector is shaping up for this year and into the future. For this experiment and research I have used the closest mall in proximity to me, the Woodland Mall.

This mall, owned by Pennsylvania Real Estate Trust, has been open since 1968. Over 100 stores, restaurants, and kiosks operate in 1.1 million square feet. Many of the stores are privately owned or are small, local players and have been left out of this article. Let’s take a look at some of the stores entering their busiest time of the season.

All yields, share prices, and analysts’ estimates are taken from Yahoo Finance upon market close Friday, November 25. Current and next year's earnings are analysts estimates for the current fiscal year and the following one. Earnings are listed on a per-share basis.

This article looks at the clothing retailers publicly traded from the Woodland Mall.

Store: Aeropostale (NYSE:ARO)

Aerospostale operates in the teen retail market. The company has remained stylish and is a hit among middle and high school students.

  • Competitors: American Eagle (NYSE:AEO), Abercrombie and Fitch (NYSE:ANF), Gap (NYSE:GPS)
  • Share Price: $14.88
  • Current Earnings: $0.90
  • Next Year Earnings: $1.22
  • Dividend Yield: 0
  • Number of Stores: 916 (as of 08/31/11)
  • Recommendation: Buy

Aeropostale is one of the hottest teenager retail companies. Shares have dropped from the $20s and now look like they could present a buying opportunity. Shares have been rumored as a buyout target.

Store: American Eagle (AEO)

American Eagle competes in the highly competitive teen retail segment. Stores always seem busy and the company has done a good job of utilizing online sales as well.

  • Competitors: Abercrombie and Fitch (ANF), Aeropostale (ARO)
  • Share Price: $12.89
  • Current Earnings: $0.90
  • Next Year Earnings: $1.04
  • Dividend Yield: 3.4%
  • Number of Stores: 929 (as of 1/29/11)
  • Recommendation: Buy

American Eagle is one of the leaders in teenager clothing. The company has been paying a dividend for several years and now represents a value pick with a three percent yield. American Eagle has long been a buyout target rumor as well. While you should not buy a company based solely on a buyout rumor, American Eagle would be a good bet on its own.

Store: Ann Taylor (NYSE:ANN)

Ann Taylor is a women’s clothing retailer aimed at the business side of clothing.

  • Competitors: Liz Claiborne (LIZ), Talbots (NYSE:TLB), Chicos (NYSE:CHS)
  • Share Price: $21.74
  • Current Earnings: $1.91
  • Next Year Earnings: $2.24
  • Dividend Yield: 0
  • Number of Stores: 950 Total (as of 10/29)
  • Recommendation: Buy

The middle-class shopper who frequents the stores was hit hard by the economy and the loss of disposable income. Same store sales are beginning to rise and shares could be poised for a breakout. Shares actually traded for $5 back in 2009. The number of Ann Taylor stores has decreased as they have closed underperforming stores, while the number of Loft stores has stayed the same.

Store: Buckle (NYSE:BKE)

Buckle is in a highly competitive teenage clothing market. The company attempts to stay trendy and appeal more to the guys' side of the market.

  • Competitors: Abercrombie and Fitch (ANF), American Eagle (AEO)
  • Share Price: $36.60
  • Current Earnings: $3.12
  • Next Year Earnings: $3.30
  • Dividend Yield: 2.1%
  • Number of Stores: 422 (as of 04/30)
  • Recommendation: Sell

The company has over 400 stores and no debt, but is trading at over six times book value. Buckle has missed earnings estimates two of the last quarters, and shares could get hit with another miss.

Store: Cache (NASDAQ:CACH)

Cache sells high end dresses and eveningwear to women. The stores are predominantly located in malls.

  • Competitors: Ann Taylor (ANN), Chicos (CHS)
  • Share Price: $5.68
  • Current Earnings: $.28
  • Next Year Earnings: $.44
  • Dividend Yield: 0
  • Number of Stores: 280
  • Recommendation: Sell

Sales have slowed down as Americans watch their spending on clothing. I think there are plenty of other women’s retailers who will have stronger holidays seasons.

Store: Chicos (CHS)

The company aims it products at women over 35, which is an age group that will be coming back to shop this holiday season and beyond.

  • Competitors: Ann Taylor (ANN), Talbots (TLB), Christopher & Banks (NYSE:CBK)
  • Share Price: $10.11
  • Current Earnings: $0.80
  • Next Year Earnings: $.99
  • Dividend Yield: 2%
  • Number of Stores: 1080 (as of 01/30/11)
  • Recommendation: Buy

Shares of Chicos trade near their fifty-two-week low. The company has zero debt on its books and has actually raised its dividend, which it began paying in 2010. Look for shares to come back around in 2012.

Store: Children’s Place (NASDAQ:PLCE)

Children’s Place is a specialty apparel retailer of clothes for children newborn to ten years of age.

  • Competitors: Carters (NYSE:CRI), Gymboree (Private)
  • Share Price: $51.87
  • Current Earnings: $3.29
  • Next Year Earnings: $3.88
  • Dividend Yield: 0
  • Number of Stores: 1,032 (as of 04/30/11)
  • Recommendation: Hold

Shares of Children’s Place appear to be fully valued at close to their fifty-two-week high. Shares have seen a nice rise since rival Gymboree was taken private by Bain Capital. The children’s clothing market, while competitive, is a relatively safe market, as consumers consistently make purchases of kids' clothing and accessories.

Store: Claire’s, owned by Apollo Global (NYSE:APO)

Claire’s and Icing were bought by Apollo Global, a large private equity group in 2007. The company has attempted to diversify away from clothing and jewelry to include bedroom furnishings and electronics.

  • Competitors: Blackstone (NYSE:BX), Kohlberg Kravis Roberts (NYSE:KKR)
  • Share Price: $11.12
  • Current Earnings: -$0.35
  • Next Year Earnings: $2.26
  • Dividend Yield: 2.4%
  • Number of Stores: Claire’s operates Icing and Claire’s around the world, with over 3,000 stores
  • Recommendation: Buy

I recommend buying shares of Apollo Global. The large private equity group is mentioned in this article for its ownership of Claire’s and Icing, two stores located in the mall. Apollo Group owns several large private companies, like AMC Entertainment and Norwegian Cruise Lines. The Norwegian Cruise Line was registered to be traded publicly last year, and this could help shares of Apollo.

Store: Coldwater Creek (NASDAQ:CWTR)

Coldwater Creek sells clothes to women through its stores and catalog. The catalog serves as a way to sell clearance merchandise from previous seasons.

Competitors: Ann Taylor (ANN), Chicos (CHS), Christopher & Banks (CBK)

  • Share Price: $0.82
  • Current Earnings: -$1.18
  • Next Year Earnings: -$0.66
  • Dividend Yield: 0
  • Number of Stores: 374 Retail, 39 Outlets
  • Recommendation: Sell

Coldwater Creek shares have reached a new fifty-two-week low over the last week. Shares traded in the $20s in 2007. The company competes in a highly competitive women’s clothing market. Shares could be headed further down, even though the company has manageable debt.

Store: Express (NYSE:EXPR)

Express clothing is available for work, casual, and going out.

  • Competitors: Gap (GPS), Hollister (ANF)
  • Share Price: $20.14
  • Current Earnings: $1.61
  • Next Year Earnings: $1.86
  • Dividend Yield: 0
  • Number of Stores: 591 (as of 01/29/11)
  • Recommendation: Buy

This retailer focusing on the 20 to 30 age demographic has done a good job with its competition. The company has also expanded into the United Arab Emirates through a franchising agreement, and has seven locations there. Shares trade at a great price earnings ratio and are currently in the middle of their fifty-two-week range. Look for a strong holiday season from this retailer aimed at both genders.

Summary

  • Aeropostale, $14.88, Buy
  • American Eagle, $12.89, Buy
  • Ann Taylor, $21.74, Buy
  • Buckle, $36.60, Sell
  • Cache, $5.68, Sell
  • Chicos, $10.11, Buy
  • Children's Place, $51.87, Hold
  • Claire's, $11.12, Buy
  • Coldwater Creek, $0.82, Sell
  • Express, $20.14, Buy

Continue to Part IV >>

Source: Hitting The Mall For The Holiday Season, Part III: More Clothing Stocks