While it has long been said that “clothes make the man,” today’s retail apparel industry players that do not have solid long-term sales strategies may see themselves struggling in some ways to stay alive – especially with regards to their physical retail locations. This may still have to do with the overall economy, but competition in the apparel industry is quite intense.
Essentially, the apparel industry includes numerous companies, including those that design and sell clothes, footwear, and other wearable accessories. Due to the highly seasonal nature of some companies, it may be better to analyze the numbers on a yearly basis rather than on a quarterly basis. This is because quarterly sales from certain companies may be substantially more or less than other quarters.
Filling in the gaps in shareholder profitability
One long-loved clothier is The Gap Inc. (NYSE:GPS). This apparel-maker’s brands also include Old Navy and Banana Republic. While Gap may not be the fastest-growing retailer of late, the company does have some pretty unique propositions when it comes to competing with large online entities such as Amazon.com, Inc. (NASDAQ:AMZN) by linking all of its stores and websites into one single inventory pipeline.
With this new inventory-management plan set to begin in June, customers will be able to reserve clothing online and then subsequently pick up their orders at the most convenient retail location.
The Gap Inc. (NYSE:GPS) is also beginning to increase the construction of regional distribution centers. This will essentially aid in sending the appropriate merchandise to the stores that currently need it the most. This may be one of the catalysts that has moved The Gap Inc. (NYSE:GPS) shares to a 10-year high. And, given its forward-looking momentum and a cheap EV/EBITDA valuation of less than 7 times, this growth may continue over both the short run and the long run.
Are options Limited with some Brands?
Another of the long-standing retail stores that helped itself through the tough economy of late is Limited Brands, Inc. (NYSE:LTD), although the company’s revenue growth has been trailing the industry average recently.
This specialty-apparel retailer has a strong focus on its women’s segment, including intimate and other types of apparel, personal care and beauty products, and accessories. Products are sold under various brands, including Bath and Body Works, Victoria’s Secret, White Barn Candle Company, and C.O. Bigelow. Products are sold via physical retail locations, as well as through the company’s catalogs and online.
Although Limited Brands, Inc. (NYSE:LTD) was a bit behind the overall apparel industry’s financial averages during the fourth quarter of 2012, it did increase its earnings by more than 10% – not bad in a still-recovering economy where purchases that are not necessarily necessities tend to take a back seat to other more pressing needs. The company also increased its net operating cash flow by almost 9%.
While the Limited Brands’ entity offers investors a dividend of $1.20 per share – which equates to an annual dividend yield of just under 2.40% – a number of analysts rate the stock a Hold. Although its share price is presently hovering near its 52-week high mark, analysts expect a compound sales growth rate for the next five years in the high single-digits, making this stock worth buying now.