Next month, the company is launching the ability for online customers to reserve store items for purchase. The plan is for a customer to find an item they want online, reserve it, and then go to the store for purchase and hopefully buy more items. Gap is being very creative with its online strategy and is encouraging its customers to shop more online and in its stores. It’s being creative and giving customers the product that they want; that explains the comparable-store sales gains at Gap.
The focus for HanesBrands is its recently announced purchase of competitor Maidenform Brands, Inc. (NYSE:MFB). The deal makes sense for both companies and is good news for shareholders. Maidenform buys its products from third parties. Now, as part of Hanesbrands Inc. (NYSE:HBI), Maidenform products can be produced at HanesBrands’ low-cost, global manufacturing facilities. The two companies’ product portfolios complement each other and can strengthen relationships with retailers such as Wal-Mart and Target by cross-marketing.
According to HanesBrands, the all-cash transaction is expected to be accretive to earnings in the first year. Within three years, HanesBrands expects $500 million in incremental sales, $0.60 in EPS, $80 million in operating profit, and $65 million in cash flow.
Foolish assessment
Victoria’s Secret and Bath & Body Works are two retailers that women love to shop at and whose products women love to have at home. Even men have learned to shop at both stores to pick up items for their loved ones. The annual Victoria’s Secret Fashion Show has become a must-see television event and the Victoria’s Secret Catalog is found in everyone’s mailbox.
For L Brands, I still think the company has tremendous room to grow overseas. Its stores are well-know and appeal to women worldwide. I also really like the 2.2% dividend yield and that makes the stock very attractive for income investors.
Gap shares continued to make new highs last week after posting strong June sales. According to Zacks, earnings are forecast to rise 17% this year and over 11% next year. Even though the stock has reached new highs, shares still remain attractive with an EV/EBITDA of 7.9.
I think the acquisition of Maidenform Brands, Inc. (NYSE:MFB) by HanesBrands is a great move. Both have complementary product lines and the acquisition will boost earnings in the first year. Shares in HanesBrands still look attractive with a forward P/E of 14 and a PEG ratio of 1.1.
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The article Catering to Women and Consistency Go Together With This Retailer originally appeared on Fool.com and is written by Mark Yagalla.
Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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