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.

The TJX Companies, Inc. (TJX), Ross Stores, Inc. (ROST) and L Brands Inc (LTD): 3 Apparel Retail Stocks that May Catch Your Attention

Although the apparel retail segment is not expected to outperform the market, some companies have survived and even benefited from the last economic crisis and now stand in considerably strong positions to benefit from various expansion opportunities. In this article I will look at The TJX Companies, Inc. (NYSE:TJX)Ross Stores, Inc. (NASDAQ:ROST) and L Brands Inc (NYSE:LTD), three firms in the industry that offer compelling and sustainable growth prospects for years to come.

The TJX Companies (TJX) Clamors for Its Part of Ecommerce PieTJX Companies: Takes advantage of economic crisis

The TJX Companies, Inc. (NYSE:TJX) is the leader in the U.S. low-price apparel retail segment and runs over 3,000 stores worldwide. One of its main competitive advantages stems from its partnerships with manufacturers such as Ralph Lauren Corp (NYSE:RL), allowing it to purchase excess inventory at a fraction of the original price. With central economies hit by the economic crisis and a slow recovery following, consumer trends shifting to lower priced products largely benefited TJX. This trend is expected to continue in the upcoming years; consensus estimates project an 11% annual earnings-per-share growth rate for the next five years. Although not poised to outperform the market, the company does deserve a closer look due to its established position in the market and its scale, which provides a considerable moat and keeps competitors lagging.

One of the main growth drivers for the company in the long-term is its expansion initiatives. While results are already outstanding in the U.S. and Europe, store base expansion should heavily contribute to revenue and earnings increases. The company targets a 5% growth in its store count by the end of 2014. The incursion into the e-commerce sector, boosted by the Sierra Trading Post acquisition last December, is also expected to deliver positive results and boost earnings by the end of the next fiscal year.

None of its close competitors seem capable of matching TJX’s operations or revenue (which is almost triple that of Ross Stores). Meanwhile, its prospects look promising and its margins are pretty shielded since when prices rise elsewhere, The TJX Companies, Inc. (NYSE:TJX) can do so as well without losing the competitive advantage provided by its offering of discount prices. Consequently, the company’s margins have reflected this pricing and margin generation power, reaching 12% for the operational margin and 7.4% for the net margin, which are considerably above the industry averages of 9.3% and 5.5%, respectively. Returns on capital and equity should also be highlighted as they comfortably double the industry means. With such compelling financials and profitability figures and a balanced debt/equity ratio while trading slightly below average valuations at 20 times its earnings, I would recommend buying this stock.

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.