Abercrombie & Fitch Co. (ANF), Guess?, Inc. (GES): Which Clothing Retailer Is The Best Investment, If Any?

Page 1 of 2

With the general direction of the market being to the upside over the past year or so, there is one area that has been plagued by disappointing earnings numbers and declining share prices.  I’m talking about the clothing industry, with household names such as Abercrombie & Fitch Co. (NYSE:ANF) and Limited Brands down from where they were a year ago.  Abercrombie & Fitch Co. (NYSE:ANF) seems to have been on a roller-coaster ride lately, with shares peaking at over $80 in 2008, falling to under $14 later that same year, rising to the $80 level again in 2011, and plummeting again to as low as $28.64 in 2012.  Just this year, there have been violent price swings in Abercrombie & Fitch Co. (NYSE:ANF), and I’m quite frankly not interested in that kind of volatility in my long-term portfolio.

I’d like to take a look at three names that are set to report earnings in the coming weeks, and try to get a feel for the direction of the sector.  In no particular order, we have:

1.)    Guess?, Inc. (NYSE:GES)? – Over the past year, Guess?, Inc. (NYSE:GES) has declined from the $37 range to just over $27, where it is trading currently.  Guess?, Inc. (NYSE:GES) sells its products through retail, wholesale, e-commerce, and licensing distribution channels in 87 countries, primarily targeting men and women between the ages of 18 and 32.  The company has steadily increased its revenues over the past several years, however due to declining margins earnings have not kept up, hence the declines in share price.  

Despite the challenges facing the company, such as the retail conditions in Europe where about 24% of the company’s stores are, consensus estimates call for earnings to increase again, by an average of 10% annually for the next several years.  Since the stock trades at just 13.4 times forward earnings and the company has an excellent balance sheet with about half a billion dollars in cash and virtually no debt, this one may be worth a look!

2.)    Aeropostale, Inc. (NYSE:ARO) – This one was trading as high as $23 in early 2012, a far cry from its current $12.53 price tag.  Aeropostale has suffered several disappointing quarters lately, including poor holiday results, and earnings dropped from $2.59 in fiscal year 2011 to $0.90 in 2012.  Aeropostale caters to a slightly younger crowd than Guess?, Inc. (NYSE:GES), targeting mainly the 14-17 year old crowd with its value-priced, active-oriented apparel.

Although results have been poor lately, Aeropostale is taking measures to right the ship through investments in fashion as well as beefing up efforts in marketing and in-store presentation.  While earnings are expected to fall even further this year to 66 cents per share, earnings are expected to rise by 50% over the next two years to $1.00 per share.   Aeropostale is a slightly higher risk than Guess?, Inc. (NYSE:GES), however with greater risk comes greater potential reward.  If Aeropostale is successful in its efforts, it is not inconceivable for earnings to climb back into the $2.50 per share range, which would make this a $30 stock easily.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Largest Pharmaceutical Companies In the World

The 10 Most Expensive Android Apps

The 9 Most Expensive Designer Bags in the World

The 7 Most Expensive Real Estate in the World

The 10 Most Expensive eBay Items Ever Sold

The 10 Most Expensive iPhone Apps

The 9 Most Expensive Designer Shoes in the World

The 10 Most Expensive Cigarette Brands

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!