Apparel Industry Stocks Lag Market in September

The Dow Jones Industrial Average rose 2.6% in September, bringing its third quarter increase to 4.3% and the year-to-date rise to 10%.
Industry stocks did not perform as well in the month. Retail stocks were flat, and manufacturer/wholesale stocks fell by an average of 1.4%, despite quarterly and year-to-date increases that beat the market average.

Retail Gainers and Losers

Once again, Lululemon (LULU) was the top performing retail stock for the month, jumping 13.4% to $73.94 per share after the yogawear company announced a second quarter revenue increase of 33%, to $282.6 million. Comparable store sales rose 15%, and earnings per share increased to $.39 from $.26 in the prior year period, beating expectations by 4 cents. UBS raised its price target on the stock from $80 to $88, and several analysts reiterated “buy” ratings.
Rue 21 (RUE) gained 10% to $31.15 despite disappointing second-quarter revenue and flat comparable store sales. Sales at the specialty retailer rose 17% to $202 million, shy of analyst expectations of $203.4 million. Earnings were $9.1 million, or $.36 per share, beating last year’s $.31 per share and consensus estimates of $.34. Third-quarter guidance remained unchanged.
Men’s Wearhouse (MW) gained 9.5% to $34.43 after reporting earnings results that topped expectations in the second quarter. Sales rose 1% to $662.3 million, just short of analyst expectations, but net income came in at $59.4 million, or $1.15 per share, three cents above guidance. Sales at the flagship Men’s Wearhouse stores, which represent 65% of total company sales, gained 4.4% on a comparable and 5.5% on a total sales basis. Guidance for the rest of the year was adjusted upward based on this encouraging performance.
Multi-channel retailer HSN (HSN) rose 8.9%, to $49.05. Second quarter year-over-year earnings per share growth of 15.1% was greater than Wall Street estimates. The stock has been moving steadily higher all year, gaining 49% year-to-date on strong sales and earnings growth. The company provides jewelry collections, fashion apparel and accessories, beauty products, housewares and other items through the HSN television network, HSN.com, mobile applications and catalog channels.
Ascena (ASNA) gained 8.3% to $21.45. The specialty retailer acquired Charming Shoppes earlier this year, and announced that fiscal fourth quarter revenues rose 30% to $939.7 million, driven by increases in online sales and new stores. The operator of Justice, Maurice’s, Dressbarn, Catherine’s and, more recently, Lane Bryant, saw net income tumble 94%, largely due to costs related to the acquisition. Adjusted earnings topped Wall Street’s view, but forecasts for fiscal 2013 were tempered a bit. Income from continuing operations were $.31 per share, two cents above consensus.
Saks (SKS) was the biggest retail loser in June, plunging 12.3% to $10.31 on investor concerns over the luxury retailer’s outlook. Its top shareholder, Mexican billionaire Carlos Slim, sold 1.5 million of his shares in the company, leaving him with 25 million shares. Saks opened its first Saks Fifth Avenue store in Kazakhstan as the retailer seeks to tap a growing appetite for luxury in emerging markets.
Bebe (BEBE) dropped 11.1% to $4.80. Though the women’s clothing company’s fourth quarter performance beat Wall Street’s view by a penny per share, its first-quarter earnings outlook was below analysts’ estimates. Company President Emilia Fabricant resigned, and her duties will be taken over by Chairman and CEO Manny Mashouf and Chief Merchant Renee Bell. Wedbush Morgan and Janney Capital Markets both lowered their price targets for the company’s stock from $6.00 to $5.50.
BonTon Stores (BONT) fell 9.4% to $9.50 during the month. The 272-door department store chain reported August sales increased a little over 2% on both a same-store total sales basis to their highest level in almost a year and a half. New CEO Brendan Hoffman (formerly of Lord & Taylor) is leading a turnaround at the company, streamlining operations by trimming costs, controlling inventory, revamping merchandising and improving marketing. The stock price has increased 182% so far this year, making it the number one gainer, but there is some concern that the stock might be getting overvalued.
Hot Topic (HOTT) lost 7.9% to $8.7. Chief Store Officer Jerry Cook resigned, and the company has begun to search for a successor.
JCPenney (JCP) dipped 6.9% to $24.29 as the company’s turnaround efforts are taking longer to than many investors anticipated. CEO Ron Johnson took Wall Street analysts on a tour of a new prototype store, and shared encouraging reports that sales in the new format departments were 20% higher than the rest of the store. However, first half sales plunged by over 21%, and are expected to drop by a similar rate in the second half. The stock has lost over 30% of its value so far this year.

Wholesale Gainers and Losers

Unifi (UFI) rose 15.7% to $12.82 after a stock market blog reported favorably tight inventory controls at the yarn supplier. Also, Norrøna, the Norway-based partner of outdoor apparel brand Polartec, has created a jacket made of Unifi’s Repreve recycled polyester.
G-III (GIII) jumped 13.1% to $35.90 after reporting better-than-expected second-quarter results. Revenue increased 9% to $251.6 million as net income dipped slightly compared to the year-ago period. The company, which sells apparel under the Kenneth Cole, Calvin Klein, Sean John and other brands, upped its full-year forecast, which now calls for revenue of $1.41 billion and earnings per share of from $2.68 to 2.78, both above prior estimates.
Cherokee (CHKE) gained 10.7% to $14.56. The licensing company acquired the Liz Lange Maternity and Completely Me brands for $14 million.
Brown Shoe (BWS) climbed 7.3% to $16.03 after the company purchased the Sam & Libby footwear brand from The Jones Group for an undisclosed amount. The deal reunites the brand with its founders, Sam and Libby Edelman, who will work for the company.
Deckers (DECK) lost 26% to $36.64 after the company apparently cut wholesale prices of its UGG sheepskin boots by up to 5% in response to lower raw materials prices. Several Ugg styles appeared on an online flash sale at discounted prices.