Last month, I discussed teen apparel retailers Abercrombie & Fitch and Aeropostale at length, and concluded that it’s tough to market to a fickle teenage crowd, which is currently enamored with nimble brands like H&M and Forever 21.
Therefore, I thought it would be interesting to see how the apparel retailers for older females had fared over the past year. For this comparison, I selected Ann Inc (NYSE:ANN), Chico’s FAS, Inc. (NYSE:CHS), and Coldwater Creek Inc. (NASDAQ:CWTR), all of which cater to females in their 40s and above. I believed that these three companies might have fared better that teen apparel retailers, since their customers are more financially secure and tend to shop repeatedly at certain stores out of habit.
Let’s first compare the fundamentals of these companies to see if they are considered growth, value or distressed stocks.
|5-year PEG Ratio||Trailing P/E||Price to Sales (ttm)||Return on Equity (ttm)||Debt to Equity||Profit Margin|
|Ann Inc.||1.40||16.77||0.64||24.34%||No debt||3.97%|
|Chico’s FAS||0.83||15.27||1.01||16.69%||No debt||6.83%|
|Advantage||Chico’s||Chico’s||Coldwater Creek||Ann||Ann, Chico’s||Chico’s|
Source: Yahoo Finance, 6/3/2013
It’s immediately clear that Ann Inc (NYSE:ANN) and Chico’s FAS, Inc. (NYSE:CHS) are in a better financial situation than Coldwater Creek Inc. (NASDAQ:CWTR), which has pretty bleak fundamentals. Since Coldwater Creek Inc. (NASDAQ:CWTR) is currently unprofitable, it can’t be even considered a value stock. Let’s take a look at how these three businesses operate to better understand the world of mature women’s retailers.
Ann suffers a setback, but forecasts a rosy second quarter
Ann Inc (NYSE:ANN), the parent company of Ann Taylor and LOFT, has risen nearly 30% over the past twelve months, compared to a 17% rise in the S&P 500 over the same period. Last quarter, the New York-based company reported earnings of $0.44 per share, a 27% decline from the prior year quarter. Revenue rose 2.5% to $560.5 million. Both its top and bottom line growth topped analyst estimates, but same-store sales declined 0.5% year-on-year. This was a disappointing follow up to the previous quarter, when Ann Inc (NYSE:ANN)’s same-store sales rose 3.8%.
Like many other retailers, Ann blamed an unseasonably cold spring for tepid sales of warm weather clothing, which resulted in higher promotional spending and markdowns to clear unsold inventory, especially at LOFT. LOFT accounts for 60% of Ann’s total sales. Looking forward, however, Ann expects second quarter sales to rise to $640 million, with a 5% to 7% year-on-year increase in same-store sales.
Ann Inc (NYSE:ANN) stated that it was focused on enhancing its e-commerce site, finding the optimal size for its stores, and expanding internationally. CEO Katherine Krill noted that dresses, skirts, woven tops, jewelry, shoes were popular at its brick-and-mortar and online stores, while its wedding collection items sold well online.
Chico’s sees strong growth potential in two smaller brands
Chico’s FAS, Inc. (NYSE:CHS), which operates four main businesses – its namesake stores, White House Black Market, Soma Intimates, and the Boston Proper online catalog – hasn’t performed as well as Ann. Shares of Fort Myers, Florida-based Chico’s FAS, Inc. (NYSE:CHS) are up 10% over the past twelve months, underperforming the market. Last quarter, the company’s earnings per share came in flat from the prior year quarter at $0.32. Revenue rose 3% to $670.7 million, and same-store sales growth was also flat, a disappointing decline from same-store sales growth of 9.6% a year earlier. Both Chico’s bottom and top line growth missed analyst estimates.
Like Ann Inc (NYSE:ANN), Chico’s FAS, Inc. (NYSE:CHS) blamed its lower-than-expected sales and profit on the cold spring. However, a glaring discrepancy surfaced between same-store sales at Chico’s, Soma and White House Black Market. Same-store sales at Chico’s/Soma Intimates slid 2.8%, while same-store sales at White House Black Market, which targets females 25 years and older, rose 6.4%. This appears to indicate that White House Black Market, a notably “younger” brand than Chico’s FAS, Inc. (NYSE:CHS), which targets female shoppers in their 40s, is gaining more traction than its parent brand. Investors should pay attention to this disparity to see if this is the start of a longer-term trend.