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I Believe This Clothing Company Should Be Worn in Your Portfolio



November 12, 2010 – Comments (4) | RELATED TICKERS: GPS , EXPR , ANF

Just like fast food, I am well aware of clothing companies as I shop for clothes online and in person a lot throughout the year.  I usually go for the clearance deals and try to capture bargains.  On holidays and Black Friday I also pay attention to which stores are doing what and which ones are packed and which ones are not.

I'm going to break down clothing fashion for the teen-40 year range and say they can be broken up into 3 major groups: ANF, GPS, and the newly introduced to the stock market EXPR.  Obviously there are other stores just as popular like AEO (American Eagle) and ARO (Aeropostale) but I will focus on 3 for this blog.  Let me break down a little background of each store in basic terms:

ANF: Abercrombie & Fitch & Hollister.  Similar to GPS, ANF is known as the Abercrombie style but also runs Hollister.  Both stores are designed similarly with dark spaces showing a lot of teenager models and is supposed to attract the very thin and very spoiled sector of the clothing industry.  Don't come here if you are any size greater than thin.  Jeans often are thin or extra thin in size and the look is something most would wear from middle school up to college.  A lot of the clothing seems extremely overpriced and carries the pre-rugged look.  Hollister in particular has stores lit so dim that you wonder what they are trying not to show to us! $4.1 B market cap

GPS: Gap, Old Navy, Banana Republic, Piperlime, and Athleta.  The mack daddy of clothing and has been for sometime.  Each brand has its target audience.  Several years ago, Gap was in.  LL Cool J was popular and was a huge endorser of Gap clothing and specifically Gap jeans.  Old Navy has catered to the less expensive crowd while Banana Republic tries to come off as a luxury type of clothing store with pants and shirts a lot more expensive than either Gap or Old Navy.  Quality varies but not much has changed with either of the 3 main clothing lines.  What I see today is very similar to what I saw 10 years ago.  $12.6 B market cap

EXPR: Express.  The newcomer to clothing as far as the stock market but definitely not new to the game.  It was founded in 1980 in Ohio, just like ANF and GPS above.  I guess in Ohio if they aren't going to produce a good NFL football team, they will produce good clothes? LOL!  Anyways, EXPR is where its at I believe.  I buy from them every couple of months.  Why?  Because they heavily push their advertising, their new products, and they keep things FRESH.  What do I mean?  Well compared to any clothing store for the teen-40 year old age group, it is clear the EXPR runs through a product cycle a lot quicker.  They often have clearance on items recently introduced a few months earlier.  They have a solid pricing structure that makes deals to customers while they still are able to keep their margins.  In fact, their net profit margin rose by 1% in the 2nd to 3rd quarter comparison!  For clothing that is a lot!  In addition their return on average equity rose from 63% to over 800%!  $1.4 B market cap

Bottom Line

What does this say?  Well let me say my experience.  I used to shop at Gap & Old Navy, then I went to Banana Republic.  Then I went to Aeropostale.  I made a couple stops at Abercrombie until I saw my legs were too large for their jeans.  Then I am in Express.  Express offers new designs frequently throughout the year.  Their fashion is fresh and that is why they are able to cycle through their products so quickly.  Their prices are just right and they cater to a crowd other than the anorexic and extremely thin like Abercrombie does.  And with a $1.4 B market cap, they have plenty of room to grow both as a company and in your portfolio if you choose to wear it.

Cheers! :o]

4 Comments – Post Your Own

#1) On November 12, 2010 at 2:01 PM, russiangambit (28.82) wrote:

I've become a fan of Old Navy again last year. Can't stand Gap (overpriced) or Banana Republic (even more overpriced and even more uncomfortable ) or Aropostale or Abercrombie (overpriced and uncomfotrable). And when I say overpriced - I mean price is too high for the quality. May me the price is OK but the quality is low.

My only complaint with old navy is what you see online and what you see in the store are two different things. Macys ahs the same issue. So, they actually force me to phisically go to the store, something I hate doing.

I haven't heard of Express, are they called just Express or something else?

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#2) On November 12, 2010 at 2:07 PM, mikecart1 (79.65) wrote:

#1) Express is in most malls I've been too.  You can check them out at their self-named website.  The reason why I like them is that they stay up-to-date with fashion and release new lines every month or so.  Also a lot of their clothes are fitted whereas a lot of clothes like shirts/dress shirts/pants are baggy from places like Gap or Aeropostale.  The quality is also significantly better than any of the other retail stores I mentioned in this blog.  I still like Aeropostale for their cheap athletic wear (hoodies and shorts), Gap (when they have a decent sale), and Abercrombie (cargo shorts).  But overall, I see Express moving up a lot quicker than the others. 

I do agree that Banana is overpriced in price vs. quality.  I find them to be pricing their stuff way too high for what you actually buy and they rarely have a decent sale. 

Right now imo, Express is on a hot streak as far as clothes and as far as a stock.

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#3) On November 15, 2010 at 3:01 PM, Joshberko (< 20) wrote:

Aerospostale is the best deal in retail right now.  Fat ROIC for a cheap P/E.  That's my kind of deal.

Peace.  JB 

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#4) On November 15, 2010 at 4:48 PM, mikecart1 (79.65) wrote:

#3) Aeropostale I think was the best deal a few months ago, but their lines have somewhat stagnated and they didn't come out with any decent outerwear/winterwear clothing this winter (so far).  Also, when I'm at the mall, even with their huge sales, their stores aren't as crowded as they used to be.  I think they are more profitable during the spring and summer months. 

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