Holiday Retail Stock Picks: Insight from The Talented Blonde

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Includes: AAPL, AEO, ANF, ARO, TLB
by: Wall St. Cheat Sheet

https://static.seekingalpha.com/uploads/2009/10/22/saupload_kristin_bentz_187x169_1.pngIn a few weeks everyone on Wall Street will start obsessing over holiday sales. To get ahead of the herd (without being too premature), I reached out to one of the best shoppers in the business: Kristin Bentz “The Talented Blonde”:

Damien Hoffman: Kristin, at what should investors start looking in order to get ahead of the herd on the holiday retail stock picks?

Kristin: There is an old saying, “The first cut is the deepest.” Be sure to watch who is discounting now and by how much. Most retailers had to keep inventories pretty skinny. So, if you see someone getting really promotional (e.g., 50% as the first markdown) really fast (like now), that’s reason to be fearful. That’s a tacit admission by the retailer they have no confidence in holiday sales.

Conversly, look at who is bringing in NEW merchandise EARLY. That’s a sure sign of products flying off store shelves.

Damien: Are there any companies you particularly see positioning themselves better than the pack?

Kristin: I still like Aeropostale (NYSE: ARO) here. They really seized market share from American Eagle Outfitters (NYSE: AEO) and Abercrombie & Fitch (NYSE: ANF). ARO continues to offer the right product, at the right price, at the right time.

In addition, Apple (Nasdaq: AAPL) is still reaping the benefits of the “technology as fashion statement” trend. If you can only afford one cool gift for your kid this Christmas, its coming from Apple.

A big surprise for me is Talbots (NYSE: TLB). This concept was a trainwreck and outdated for a really long time. Management completely gutted the brand and revamped the product line. They closed lines they should have never started in the first place (e.g., Mens, Kids). Now the stores look amazing. They are managing to attract the highly coveted younger female demographic (40-ish ) — the old Ann Taylor (NYSE: ANN) customer — without alienating their core customer (historically more mature). Plus, Talbot’s comps have been so bad, I believe the stock can go nowhere but up.

Damien: What should investors look for as sell signs if their Peter Lynch exercise doesn’t pan out as expected?

Kristin: In addition to what I said in question number one, also look for retailers that are discounting (i.e., “blowing out”) core items. For example, a red flag for me was on a recent visit to ANN where they were heavily discounting all their “little black dresses” the first week in October. Any fashionista or merchant worth their salt will tell you that the “Little Black Dress” is something that consistently sells — especially into the holiday season within an economic climate where women can’t afford risky fashion choices.

Damien: Kristin, thank you very much for this savvy advice! I look forward to staying in touch as the holiday season unfolds.

Kristin: Thank you very much, Damien.

* Kristin has no conflicts or positions in any of the aforementioned stocks.