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Apparel Stocks Underperform Dow in December

The Dow Jones Industrial Average fell slightly in the four weeks ending December 28, cutting the year-to-date rise to 5.9%.
Retail stocks lagged the overall market, falling 6.2% in the month, but managed to turn in an almost 8% gain for the year.
The wholesale and manufacturing index was off by a collective 1.8%, bringing the year-to-date gain to almost 14%. A couple of stocks did very well. Michael Kors (KORS) saw its stock price rise by more than 100% in the year, making it the top performing wholesale issue. Brown Shoe (BWS) and Gildan Activewear (GIL) almost doubled. However, several high profile companies, like UGG-maker Deckers Outdoor (DECK) and UnderArmour (UA) saw their stocks plunge by low- to mid-double-digits.

Stock Averages

Month

YTD

Dow

-0.7%

5.9%

Retail

-6.2%

7.9%

Whsale/Mfg

-1.8%

13.9%

Dec stocks

Retail Gainers and Losers

Month/YTD

12/28/2012

YTD

Retail

Symbol

% Chg

Price

%Chg

Chrstohr & Bnks

CBK

15.3

5.27

125.2

JCPenney

JCP

5.7

18.97

-46.0

Lululemon

LULU

3.5

74.31

59.3

The Walking Co.

WALK.PK

3.0

8.25

129.2

HSN

HSNI

2.4

54.20

49.3

Coldwater Crk

CWTR

-16.3

4.79

1.5

Buckle

BKE

-16.1

42.90

5.0

Steinmart

SMRT

-15.7

7.20

5.7

Dick’s Sptg Goods

DKS

-14.2

45.05

22.2

Limited Brands

LTD

-12.0

45.90

13.8

Christopher & Banks (CBK) was the top performing retail stock in December, jumping 15.3% to $5.27 per share, a 52-week high. The company reported its first quarterly profit in many years in late November, and has risen ever since. For the year, the stock was one of the top retail issues, up by 125%.
JCPenney (JCP) gained 5.7% to $19.97 as investors continued to abandon the stock amid fears that its turnaround would take longer, cost more, and be more difficult to pull off than originally thought. For the year, the stock lost 46% of its value, putting it among the worst performing retail stocks of the past year.
Lululemon (LULU) gained 3.5% to $74.31 after logging a stronger-than-expected 47% surge in third-quarter profits. The company earned $57.3 million, or $0.39 per share, compared with $38.8 million, or $.27 per share, a year earlier, and analyst expectations of $0.37. Revenue climbed 37% to $316.5 million, beating expectations of $305 million. Same-store sales soared 18%. Gross margin fell 400 basis points to 55.4%. The company forecasted fourth-quarter earnings of $0.71 to $0.73 on revenue of $475 – $480 million, trailing consensus estimates. The yoga apparel retailer was one of the top performing retail stocks for the year, up 59.3%.
The Walking Company (WALK) gained 3% to $8.25. The stock was the second biggest year-to-date retail gainer, up 129%.
HSN (HSNI) gained 2.4%, to $54.20, after announcing it will be partnering with the Coca-Cola Company on a multi-year merchandise, marketing and digital collaboration which will intertwine the Coca-Cola brand into HSN’s programming events and multiplatform content. HSN will sell a complete line of Coca-Cola merchandise on the air and online.
Coldwater Creek (CWTR) was the biggest retail loser for month, dropping 16.3% to $4.79. Co-founder and CEO Dennis Pence retired, replaced by former president and chief merchant Jill Brown Dean. Pence will continue as Chairman until January 1, 2014. The company reported a smaller-than-expected quarterly loss, helped by higher comps and improved margins. It has been posting losses for more than two years, losing market share to larger rivals such as Chico’s and Ann Taylor Stores as it struggles with lackluster merchandise and sluggish traffic.
Buckle (BKE) was the second biggest retail loser, dropping 16.1% to $42.90. Same-store sales declined 0.1% in November, while net sales increased 1.9% to $96.7 million.
Steinmart (SMRT) fell15.7% to $7.20 on news that the value retailer had received an expected non-compliance letter from the NASDAQ for failure to file its quarterly statements on time. This is the second such letter the company has received on the matter. The company announced in November that it would be delaying its third quarter filing and would have to restate financial statements for the past three years due to errors.
Dick’s Sporting Goods (DKS) lost 14.2% to $45.05. The company issued a special dividend of $2 per share on Dec. 28 to shareholders of record Dec. 17. The retailer funded the payout of about $254 million with cash on hand. The company suspended the sale of semi-automatic sporting rifles at its stores nationwide following the Newtown, CT school shooting tragedy in which 20 children and 6 adults were killed.
Limited Brands (LTD) dipped 12.2% to $45.90 after hitting a 52-week high in late November. The company paid a special dividend of $3 per share on Dec. 26 to shareholders of record Dec. 20. The parent company of Victoria’s Secret and Pink has nearly 300 million shares outstanding, according to its most recent quarterly filing, but its equity has declined to negative $500 million and its long-term debt has increased to $4.5 billion. The stock gained almost 14% year-to-date.

Wholesale Gainers and Losers

Month/YTD

12/28/2012

YTD

Wholesale

Symbol

% Chg

Price

%Chg

Delta-Galil DELTY

20.5

12.41

85.2

Jaclyn JCLY.PK

13.5

5.39

-31.3

Iconix ICON

8.4

21.85

34.1

Interface IFSIA

7.4

15.78

36.7

Crocs CROX

3.9

13.87

-6.1

Oxford OXM

-16.9

45.40

0.6

G-III App Grp GIII

-13.0

33.10

32.9

R.G. Barry DFZ

-12.5

13.41

11.0

Columbia Spwr COLM

-10.0

52.09

11.9

Perry Ellis Intl PERY

-9.7

19.58

37.7

 

Delta-Galil (DELTY) rose 20.5% in the month to $12.41, after the US subsidiary of the manufacturer and marketer of branded and private label apparel products announced that it would acquire the trademarks of LittleMissMatched for an undisclosed price. Founded in 2003 as a line of non-matching socks sold in odd numbers, LittleMissMatched has evolved into a lifestyle brand for girls of all ages. The brand assortment currently includes apparel, primarily socks, as well as accessories, bedding, home décor, furniture and cosmetics. Products are sold through its retail stores and online at its website, via wholesale channels in the U.S. and internationally, and through an extensive network of licensees. The company is privately held, but industry sources estimate annual sales to be $20 million.
Iconix (ICON) lost 8.4% to $21.85. The branding company, whose 29 properties include Candie’s, Danskin and Badgley Mischka, acquired soccer brand Umbro from Nike for $225 million. This is Iconix’s second purchase from Nike, after buying the athletic clothing brand Starter in 2007.
Crocs (CROX) gained 3.9% to $13.87. Imperial Capital initiated coverage of this company with a rating of “outperform” and a price target of $16.
Oxford (OXM) dropped 16.9% to $45.40, after the company announced disappointing third-quarter earnings and a modest fourth-quarter forecast. Strong sales of Tommy Bahama and Lilly Pulitzer brands helped offset its struggling Ben Sherman’s business. It also faced problems as a result of Superstorm Sandy. The company earned $3 million, or $.18 per share, compared with $1.6 million a year ago, or $.10 per share, missing estimates by two cents. Revenue rose 7% to $181.4 million. The company expects adjusted earnings of $2.60 to $2.70 per share for the full year, and revenue of $845 – $855 million. Analysts forecast $2.92 per share on revenue of $855.7 million. The company now expects adjusted earnings of $.64 -$74 per share for the fourth quarter on revenue of $225 – $235 million, compared to analyst estimates of $.93 on revenue of $234.6 million for the period.
G-III Apparel Group (GIII) lost 13% to $33.10, even though net income rose 11% in the third quarter, beating expectations despite shipping problems stemming from Superstorm Sandy. The company earned $48.3 million, or $2.37 per share, for the three months ended Oct. 31, beating analyst estimates by $.08 per share. A year earlier it earned $43.6 million, or $2.16 per share. Revenue increased 7% to $543.5 million from $510 million, but fell short of Wall Street’s $572.2 million estimate. The manufacturer of sportswear and accessories lifted its profit outlook for the year but cut its revenue forecast. For the fiscal year, G-III now anticipates earnings, excluding one-time costs, of $2.82 to $2.92 per share, bracketing analysts’ estimate of $2.85 per share. Previously the company forecast $2.74 to $2.84 per share. G-III also lowered its revenue guidance to $1.39 billion from $1.41 billion. Wall Street predicts $1.41 billion. The company has also signed an agreement with Ivanka Trump to develop an apparel collection including sportswear, dresses, suits, suit separates, sleepwear, active wear, jeanswear and intimates for department and specialty stores in the United States, Canada and Mexico for spring/summer 2014.
Perry Ellis International (PERY) fell 9.7% to $19.58 in December. The company paid a special cash dividend of $1 per share on Dec. 28 to shareholders of record as of Dec. 21 to help investors avoid possible tax hikes on dividend income in 2013. The total cost to the clothing company, which owns brands such as Jantzen, Laundry by Shelli Segal and Redsand, is roughly $16 million.