The apparel industry is all set for a challenging yet interesting 2013. In terms of cashing in on the opportunities, the industry needs to improve its flexibility in the supply chain, improvise designs, and innovate, along with retaining thin margins. Increasing production costs and slow volume growth further intensify the challenges.
In this article, I have picked up three apparel stocks, Aeropostale, Inc. (NYSE:ARO), Ross Stores, Inc. (NASDAQ:ROST), and Kohl’s, that are constantly upgrading their strategies to keep their customer’s interest alive. These companies have sustained growth in the past and believe in retaining it through their strategic approach toward value consumers. Let’s discuss these stocks and find out what opportunities they bring for investors.
Aeropostale, Inc. (NYSE:ARO)
Aeropostale, Inc. (NYSE:ARO) reported fourth quarter 2012 results with EPS of $0.24, which was in line with consensus expectations. Due to a weak holiday season, the company has seen a decline in net sales by 1%. Along with that, it also saw a decline in comparable-store sales and e-commerce channels by 8% in comparison to 7% last year.
Aeropostale, Inc. (NYSE:ARO) tried to offset some of its declines with an increase in e-commerce sales by acquiring GoJane, a rapidly-growing online retailer, in November 2012. The GoJane acquisition will provide a long-term growth opportunity to the company with its well-established e-commerce platform. With this acquisition, e-commerce sales are expected to reach $500 million in the future, versus $217 million at the end of 2012.
The company has faced a poor response from customers regarding fashion. Revenue declined in both the women’s and men’s businesses by 10% and 4%, respectively. The women’s business is one of its core businesses, constituting 66% of its overall revenue.
Aeropostale, Inc. (NYSE:ARO) is focusing on developing its direct-to-consumer channel in order to push sales to maintain a balance between profits and the cost-of-production. By hiring new talent as the heads of design and women’s merchandise, it’s trying to revamp its women’s segment by adding fashion-focused apparel products.
Overall, the company is set to transform from a traditional store into a true lifestyle brand by delivering great fashion infusions in each segment with competitive pricing that targets young customers. I believe that the impact of these strategies will be visible in the upcoming summer collection.
Ross Stores, Inc. (NASDAQ:ROST)
Ross Stores, Inc. (NASDAQ:ROST) reported EPS of $1.07 in its fourth quarter, and its total sales increased to approximately $2.8 billion with support from 6%-7% square-footage growth. This helped its comparable-store sales grow by 5% for the quarter. Along with comp-store sales, Ross Stores, Inc. (NASDAQ:ROST)’s juniors business performed very well. Under economic pressures, the juniors’ business segment gained double-digit profits in 2012, indicating a shift toward the new-generation market.