The Gap Inc. (GPS), Limited Brands, Inc. (LTD): Your Cheatin’ Heart and Your Portfolio

Does your bride sport RayBan aviators and a Michael Kors Holdings Ltd (NYSE:KORS) watch? Has she been buying more Victoria’s Secret underwear of late? These are favorite brands of ladies who cheat according to the extramarital site, Ashley Madison, which surveyed its female members for their favorite brands.

The Gap Inc.Good news for retailers, the shady ladies spend twice as much on apparel once they start cheating. Cheating may be the salvation of fashion retailers whose clothes philanderesses (?) like to buy. Maybe there should be a line called Philandress at Banana Republic, owned by The Gap Inc. (NYSE:GPS), the number one favorite apparel of cheaters. Unsurprisingly, Victoria’s Secret, owned by Limited Brands, Inc. (NYSE:LTD) made the top ten. They could call theirs Philundress.

Their cheatin’ hearts

While you may picture a fashionable femme fatale it turns out the lady cheaters also wear clothes from J.C. Penney Company, Inc. (NYSE:JCP)?! Who knew? Most of the cheating ladies at Ashley Madison are career women in their 30s according to its CEO Noel Biderman and these are the retailers that demographic shops.

Their cheatin’ hearts also fall for Macy’s, Inc. (NYSE:M) at number three and Ann Taylor at number four favorite brand. Lane Bryant, the plus size store owned by Ascena Retail Group Inc (NASDAQ:ASNA) also came in at number seven after bebe stores, inc. (NASDAQ:BEBE). Trailing at eight and nine are Chico’s FAS, Inc. (NYSE:CHS) and Lululemon Athletica inc. (NASDAQ:LULU), respectively.

The Gap Inc. (NYSE:GPS) has turned itself around after some shaky quarters. Gap owns Old Navy, Banana Republic, Piperlime, Athleta, Intermix, and the Gap with a total number of 300 franchisee-run stores, 3,100 company-operated stores and web sites in 90 countries.

The Gap Inc. (NYSE:GPS) is trading at 52 week highs at a 16.24 trailing P/E with a 1.50% yield. The stock is up 53.33% in the last year. As the family-friendly apparel retailer of the group (despite the Banana Republic rating by cheaters) selling to men, women, and children it has benefited from increasing consumer confidence.

It competes against most of these other retailers listed including Lululemon Athletica inc. (NASDAQ:LULU) with its ladies’ Athleta brand. Taking a page from Lululemon’s playbook it is reaching out to the yoga communities with classes just last week sponsoring for the first time the NYC Times Square summer solstice yoga event. Jefferies analyst Randal Konik wrote in a note in April that Athleta could almost triple from its current 34 store count to 100 and add $5-10 per share to The Gap Inc. (NYSE:GPS) stock.

Piperlime, The Gap Inc. (NYSE:GPS)’s e-commerce site, was dubbed “best shopping like a department store” by on online poll of fashionistas in April. Watch out, Macy’s, Inc. (NYSE:M) and Amazon.com, Inc. (NASDAQ:AMZN)!

The company is now trading 6.18 times book as the stock has climbed with a 42.90% quarterly earnings growth rate year (yoy). Since February analysts have revised upward their five year EPS growth rate from 9.37% to 12.17%. They have also been revising the median price target upward from $40.00 in April to $45.00 now.

In May the company reported same store sales up 7%, double the number for most retailers reporting at 3.4%.

Ascena Retail Group Inc (NASDAQ:ASNA) probably expected more bounce to the ounce from its acquisitions of Lane Bryant and Catherines plus-size brands but these key buys haven’t been enough to offset some of its foundering divisions like dress barn. The company reported disappointing Q3 results on June 5 guiding lower on FY 2013 earnings to $1.10-1.15 and reporting a drop in comps of 4% ex-e-commerce. EPS dropped from $0.34 to $0.26 from Q3 of 2012.

Ascena Retail has a trailing P/E of 22.87 and a forward P/E of 12.46 with a PEG of 1.04. It also owns maurice’s (teens), dress barn, and Justice (tweens) for a total of 3,800 stores in the US, Puerto Rico, and Canada.

Analysts believe that Ascena will perform better than Gap with a 15.87% five year EPS growth rate and a median price target of $21.00 for 20% upside.

Bebe Stores is a speculative small-cap name ($442.83 million) and only covered by four analysts but it does have a yield of 1.90%. The stock is down 4.94% over the last year and has a short interest of 11.80%. Nonetheless, it has a large insider hold of 59.52%.

The company operates 244 stores in the US, US Virgin Islands, Canada, Puerto Rico, and Japan and internationally licenses its bebe, 2b, and BEBE SPORT brands aimed at the 21-34 year old woman.

On June 27 the stock rose 6% on a positive Janney Capital Markets analyst note. Analyst predict a15.00 % five year EPS growth rate, same as The Gap. It is a volatile name but one to inspire some due diligence for a small flutter (Britspeak for tiny bet.)

Limited Brands, Inc. (NYSE:LTD), owner of Victoria’s Secret, Pink, La Senza, Bath & Body Works, and Henri Bendel for over 3,300 stores worldwide as well as the much-admired catalogs and e-commerce sites. Limited Brands, Inc. (NYSE:LTD) offers the highest yield of these four names at 2.30% with a trailing P/E of 18.84 and a forward P/E of 14.03. The PEG stands at 1.55.

The company reported a 3% rise in same store sales in May and also reported Q1 net sales at $2.268 billion and EPS rose 17% from Q1 in 2012. The company has strong insider conviction with CEO and founder Leslie Wexner holding over 17 million shares.

It recently honored its Pink brand, the very popular line for collegiate age girls, to freestanding store status. Its Victoria Secret and Bath & Body Works command a dominant position in fragrance and lingerie.

Although the stock has underperformed the S&P 500 this last year it has been a five bagger since 2009. Over the last five years the dividend has grown by 64.92%.

Cheaters never prosper

But they do like to dress well and spend twice as much money doing it.

I like the yield and dividend growth at Limited Brands, Inc. (NYSE:LTD) best but Gap is making some progress with Piperlime and Athleta that bears watching. Ascena Retail needs to show improving earnings and accretion from Lane Bryant and Catherines. Bebe Stores is interesting as a speculative trade.

Caveat for the gentlemen: don’t rifle through your lady’s closet for these brands. Millions of women wear them because these are popular brands. That’s why you want to buy the stocks. Trust your bride and buy her some roses and a Victoria’s Secret gift card.

AnnaLisa Kraft has no position in any stocks mentioned. The Motley Fool recommends Ascena Retail Group (NASDAQ:ASNA).

The article Your Cheatin’ Heart and Your Portfolio originally appeared on Fool.com and is written by AnnaLisa Kraft.

AnnaLisa is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

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!