Analysts expect very respectable 12.28% five-year EPS growth, about half what’s expected for Francesca’s at 23.48%, explaining ANN’s higher PEG of 1.24. ANN’s operating margin at 6.50% is much smaller than Francesca’s Holdings Corp (NASDAQ:FRAN). It has a smaller insider hold at 3% as well.
Shorts bet against ANN thanks to last quarter’s decline in same store sales of 0.5% yoy and although beating analysts’ expectations, earnings of $0.44 per share drooped by 27% yoy.
What’s the matter with Vera?
Although Vera Bradley, Inc. (NASDAQ:VRA)’s colorful accessories are popular with younger women and its trailing P/E lower than these other two at 15.03 with a forward P/E at 12.64 the shorts would have you believe it’s in imminent danger of bankruptcy. The company only owns 85 stores with much of its merchandise sold at small boutiques and gift shops.
Operating margin at 19.15% is good and although total debt is high at $5 million to $8 million cash, it has the highest insider conviction at 50%. Analysts expect virtually the same 5-year EPS growth rate as ANN at 12.83%. The PEG is at 1.12.
The company disappointed by 5.7% at its July earnings release after three quarters of surprising on the upside. It also guided lower and announced its CEO departure and a rise of 41% for inventories. Net income fell 27% to $9.19 million yoy and the net operating income cash flow rate was slashed by half from July 2012.
CEO Michael Ray’s leaving came after the resignation of the CFO, Jeff Blade, five months ago. Analyst downgrades followed from Wells Fargo, Piper Jaffray, Sterne Agee, and Baird. Ouch! And the shorts’ case was made.
A trio of sob sisters
Big sister ANN may be the best bet with less volatility and multi-channel potential but Francesca’s is the unique name for the speculative at heart with the most growth expected and expansion planned for its low-overhead, individualized boutiques. As for Vera Bradley, Inc. (NASDAQ:VRA), with those inventory troubles and management upsets this is one troubled sister, and your best bet is to stay away. There are better women’s specialty retailers with yield than Vera Bradley. Women’s retail is a crowded space with no excuses for stores that aren’t crowded.
The article Three Short Story Stocks originally appeared on Fool.com and is written by AnnaLisa Kraft.
AnnaLisa Kraft has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.