Moms only have to wait three more weeks until the dancing in the streets officially commences with the kids finally out of the house. The crazy back to school season is in full swing for retailers, and its importance is second only to the holidays as a make-or-break period for these companies.
One store that was surprisingly busy at the mall last weekend was Abercrombie & Fitch Co. (NYSE:ANF), with a long line at the checkout counter contrasting sharply with other retailers. At a PEG of .98 it is fairly valued and offers a 1.50% yield. It operates 1,053 stores representing four brands: Abercrombie & Fitch Co. (NYSE:ANF), Gilly Hicks, abercrombie kids, and Hollister, with roughly a third of these located in international markets.
CEO Michael Jefferies has been the lightning rod of adverse press this year with well publicized rehashings of his exclusionary brand philosophy and details of his strange fiats. But with improving numbers he may end up with the accolade of “crazy like a fox” rather than “how weird is this guy.”
The company presented a compelling picture of improving profitability at the Jefferies Global Consumer Conference in June, with gross profit as a percentage of Q1 sales coming in at 65.9% in 2013 to 58.7% in Q1 2012. Net loss per basic and diluted share also decreased from $0.25 to $0.09.
This is a very competitive space, and Abercrombie & Fitch Co. (NYSE:ANF) competes against Aeropostale, The LTD‘s Victoria’s Secret PINK collection, Gap, The Buckle, and Urban Outfitters, Inc. (NASDAQ:URBN), to name a few. Failure is not an option with rival American Eagle diving 14% after disappointing.
Abercrombie & Fitch Co. (NYSE:ANF) has made considerable progress on each brand’s websites with direct to consumer representing 16% of total company sales and its database from social media, websites, mobile, and e-mail has over 10 million contacts. The company just launched an iPhone app for Abercrombie & Fitch Co. (NYSE:ANF) stores in its ongoing mobile commerce drive.
A beautiful call
Another company associated with a famous eccentric is Steven Madden, Ltd. (NASDAQ:SHOO). In 2010 the company bought out bankrupt designer Betsey Johnson, famous for her funky and eclectic designs and for turning cartwheels on the catwalk (she’s over 70 now).
The purchase of this brand and possibly more successful purchases like it helped prompt Goldman Sachs to upgrade the name from a Sell to a Buy with a $69 price target on Aug. 5, sending the stock up almost 5% intra-day to its all time high of $55.99.
Their ticker may read SHOO, but Steven Madden, Ltd. (NASDAQ:SHOO) is branching out from shoes and accessories using Betsey Johnson as a platform, launching a fragrance, luggage line, and dresses this year. CEO Edward Rosenfeld said, “We feel Betsey should be generating between $15 million and $20 million of royalty income net expenses over the next few years.” Betsey is also going global with stores opening in China.