American Eagle Outfitters (AEO), The Buckle, Inc. (BKE): Can Clothes Help Make Your Portfolio Recession-Proof?

With the economy in a steady upswing, many people are worried that the stock market is in a bubble that’s about the burst. While I am not one of those individuals, it doesn’t hurt to be a little cautious and buy stocks that will pad your portfolio in case of a fall.

American Eagle Outfitters (NYSE:AEO)

Clothing-related firms come to mind as companies that will do well even during a recession. Everyone needs to wear clothes, after all, even when the economy is hurting.

Before plunging your money into just any clothing company, however, you should first take a look at what each has to offer. American Eagle Outfitters (NYSE:AEO), The Buckle, Inc. (NYSE:BKE) and Ross Stores, Inc. (NASDAQ:ROST) are all major retailers that have shown that they have the ability to succeed. But is that success likely to continue?

American Eagle Outfitters (NYSE:AEO) looks at international expansion

With international expansion as one of this company’s main goals, American Eagle Outfitters (NYSE:AEO) appears ready to take operations to the next level. The firm is about to take control of six licensee stores in China, and that’s just the beginning of its Chinese expansion. China represents one of the largest apparel markets on the planet, and this is primarily driven by an growing middle class and the country’s booming urbanization. The company’s Chinese expansion is in addition to its recent entry into Mexico to take advantage of its large young demographic that is increasingly consumed by fashion trends. Like China, Mexico also has an increasing middle class.

A consensus estimate from 26 analysts expects American Eagle Outfitters (NYSE:AEO) to grow at a rate of 11.6%. The firm currently trades with a price-to-earnings ratio at 14, which is well within value range, and the consensus estimate indicates the firm could be priced at over $38 in 2018. That’s approximately a 15% annual growth on share price.

The Buckle, Inc. (NYSE:BKE) focused domestically

Unlike American Eagle Outfitters (NYSE:AEO), The Buckle, Inc. (NYSE:BKE) hasn’t focused much of its attention to developing its brand outside of the United States. All of the company’s 440 stores are located in the U.S. Due to the fact that the firm doesn’t look to be expanding internationally or even into Canada, I see limited growth potential. I could be wrong, however, as there is still much room for the company’s growth within its own borders.

In Nebraska, the state with the highest density of The Buckle, Inc. (NYSE:BKE) stores, there is only one store for every 145,000 people. That shows opportunity for local expansion. Furthermore,analysts believe the firm will increase its earnings per share by 10% this fiscal year.