Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

One Clothing Retailer to Buy and Two to Stay Away From: The TJX Companies, Inc. (TJX), Kohl’s Corporation (KSS), J.C. Penney Company, Inc. (JCP)

Within the retail sector, there are many stocks to choose from.  Industries range from discount to luxury retailers, and grocery to electronic retailers.  Even within the clothing retailers, there are several stocks that have well-known brands.  As a result, it’s important to take a discerning view towards clothing retailers.  Fashion is extremely cyclical, and in the current challenging economic environment, there are definitely winners and losers among the clothing retailers.

Down on their luck

J.C. Penney Company Inc. (NYSE:JCP)J.C. Penney Company, Inc. (NYSE:JCP) investors awoke to a rough day of headlines for the company recvently, as the stock cratered 15% after the company revealed fiscal fourth-quarter and full-year results.  For the quarter, J.C. Penney Company, Inc. (NYSE:JCP) reported a net loss of $552 million or $2.51 per share for the quarter and a loss of $985 million, or $4.49 per share for the year.  Investors are increasingly concerned that Chief Executive Officer Ron Johnson’s vision for the company’s turnaround is not materializing.  Upon releasing results, he admitted that the company’s 2012 results were a disappointment.

Indeed, it’s clear that J.C. Penney Company, Inc. (NYSE:JCP) is quickly losing favor among consumers.  Fourth-quarter total sales fell 28% versus the same quarter a year ago.  Furthermore, the company’s fourth-quarter gross margin fell almost 7 percentage points year over year.

Another clothing retailer and close competitor of J.C. Penney Company, Inc. (NYSE:JCP) is Kohl’s Corporation (NYSE:KSS). Kohl’s Corporation (NYSE:KSS) reported that same-store sales, a metric that includes locations open at least a year, rose only 1.9% during the fourth quarter and 0.3% for the year.  Markets were disappointed, and the company’s stock price has followed suit, losing more than 15% of its value in less than four months.  The current year’s fourth quarter actually included an extra week, meaning the company’s results would have been even worse without the benefit of an extra sales week.

For what it’s worth, Kohl’s Corporation (NYSE:KSS) is trading at a fairly cheap valuation.  The company is trading at a trailing-price to earnings ratio of slightly more than 10.  Along with the company’s fourth-quarter and full-year results, Kohl’s Corporation (NYSE:KSS) management also announced it would raise its dividend by 9%.  Kohl’s Corporation (NYSE:KSS) has a market-beating dividend which yields 3% at recent prices.

A winner to consider

One stock executing extremely well is The TJX Companies, Inc. (NYSE:TJX).  The operator of TJ Maxx and Marshall’s stores has seen its shares climb more than 20% over the past 52 weeks and are now sitting near all-time highs.  Indeed, the company’s performance has been as impressive as its stock price rally.  In February, the company reported spectacular adjusted earnings per share growth of 28% for full-year 2012, on the strength of a 12% rise in sales.

Not only has TJX Companies, Inc. (NYSE:TJX)’s stock soared over the past few years, but the company continues to consistently reward shareholders.   On the same day of its earnings announcement, TJX Companies, Inc. (NYSE:TJX) also revealed its plan to repurchase approximately $1.3 billion to $1.4 billion of its own stock during the current fiscal year, after repurchasing a total of $1.3 billion last year.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.