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Positive Sales and Earnings Surprises Propel Retail Apparel Stocks in April

The Dow Jones Industrial Average rose 2.7% in the five weeks ending May 3, bringing its year-to-date increase to 15.7%. Financial markets continue to gain steam despite spotty economic indicators as corporate profitability exceeds expectations in many industries.

Apparel and retail stock gains slowed compared to last month, but continue to outpace the overall market. Retail stocks on average surged 6.1% in April, and have managed to turn in a 14.6% gain for the year so far, helped by better-than-expected earnings performance at many key companies. The wholesale and manufacturing index jumped by 7.5%, bringing the year-to-date gain to almost 23%.

Retail Gainers and Losers

Zumiez (ZUMZ) was the top performing retail stock in April, jumping 31% to $29.99 per share, after the skateboard and sportswear retailer reported that March sales increased 20% to $61 million from $50.9 million last year. Same-store sales rose 2.1%.

Bebe (BEBE) gained 22.5% to $5.11, on news that Janney Financial upgraded the company’s stock from “neutral” to “buy.”  Revenue in the most recent quarter fell 3.7% to $104 million, however, missing Wall Street expectations of $115 million. The company announced the appointment of Michelle Landgrebe as EVP, GMM of its 2b division, and Liyuan Woo as CFO. Both will report to recently-appointed CEO Steven Birkhold.

Lululemon Athletica (LULU) gained 22.5%, to $76.36.  In March the company recalled a key style in its yoga pant line due to sheerer-than-acceptable fabric, and the stock took a big hit. However, the activewear retailer has announced that it would be replenishing its stores with the style by early June, much sooner than previously expected, allowing it to more than recover from problem.

Belk (BLKIB) gained 21%, to $49, as the department store company continues to upgrade its merchandise mix and invest in its ecommerce business.

Five Below (FIVE) was the biggest retail loser for month, dropping 4.3% to $36.25. Although fourth-quarter sales rose 26% and earnings beat analyst expectations, the company announced that first-quarter sales and margins would be lower than previously anticipated. Many investors are concerned that dollar stores’ best days will be in the rear-view mirror if economic and job growth begin to pick up.

Amazon (AMZN) was the second biggest retail loser, dropping 3.2% to $258.05, but probably the most talked-about company in the industry. Investors were pleasantly surprised by quarterly earnings (even though they fell), but were disappointed by revenue growth, which appears to have slowed in the past few quarters. Investors have expressed many concerns about the ecommerce leader. Declining traffic patterns indicate that competitors are eating away at Amazon.com share in many categories. Many states of moving to levy sales tax on e-commerce purchases, which would take away a key pricing advantage that Amazon currently enjoys. The company also might be losing its competitive edge in the Web services area as the cloud computing space becomes more crowded. Ebay has simplified its fee structure, which might put pressure on Amazon’s deals with its merchants. Also, company management continues to invest heavily in R&D, infrastructure, and acquisitions that might take a while to bear fruit. During the month the company acquired book recommendations site Goodreads, and piloted several original television series, paving the way to an entry into the web tv space.

Cato Stores (CATO) lost 1.5% to $23.80, after the retailer announced an 11% plunge in March same-store sales due to cold weather.

Wholesale Gainers and Losers

Dixie Group (DXYN)) rose 31.3% in the month to $7.35, as the textile company’s revenue and profit growth beat Wall Street expectations in its most recent quarter. Sales rose almost 20% to $75.4 million, and EPS swung from a one-cent loss in the first quarter of last year to a $.05 per share profit.

Coach (COH) gained 16.5% to $58.25 after reporting better-than-expected quarterly results helped by higher sales in North America. Revenue rose 7% to $1.19 billion in the company’s third fiscal quarter, beating the average analyst forecast of $1.18 billion, with same-store sales up 1%. North American sales jumped 8%. Net income increased 6% to $239 million, or $.84 per share, from $225 million, or $.77 per share, a year earlier. This is excellent news for investors who stuck by the luxury handbag maker in recent months after others gave up on it in favor of Michael Kors and other competitors.

Carter’s (CRI), gained 14.5% to $65.56, after the maker of OshKosh B’Gosh and Carter’s branded children’s clothing reported net income rose 28% thanks to its expanded overseas and ecommerce businesses. Sales increased 7% to $73.5 million. International sales jumped 30% to $60.9 million.

Oxford Industries (OXM) leaped 14.1% to $60.61, after the company beat both revenue and earnings forecasts. Wall Street expected it to lose thirteen cents per share, but it instead earned $.08.

UnderArmour (UA) rose 12.7% to $57.71 after the performance apparel company reported first quarter results and raised 2013 operating income and revenue guidance. Total revenue in the quarter rose 23% to $372 million, topping estimates of $468 million. Apparel revenue increased 22% to $346 million, while footwear leaped 27% to $81 million. Earnings of $.07 per share were down 50% from a year ago due to higher marketing and other costs, but exceeded analyst estimates by $.04 per share.

Delta Apparel (PERY) fell 20% to $13.18 after the sportswear maker suffered sales and earnings declines in its third fiscal quarter. Net sales fell 4% to $120.1 million from the same period last year, and net income plunged 16%. The company blamed unseasonably cold weather, which resulted in slow sales of its Soffe brand.

Cherokee (CHKE) fell 3.1% to $13.27 in February. The marketing and licensing company reported lackluster fourth-quarter and full-year results. Quarterly revenue growth was flat at $6 million, while full-year sales increased 3.7% to $26.6 million. Quarterly net income totaled $1.1 million, down from $1.5 million in the prior year period. Fiscal year net income dropped from $7.5 million to $6.8 million.

Deckers Outdoor (DECK) fell 3% to $54 after announcing that first-quarter profit shrank 87% as costs rose, and outlook disappointed investors. Earnings of $1 million, or $.03 per share were down from $8 million, or $.20 per share from last year. Revenue jumped 7% to $263.8 million on strong sales of Ugg boots at the company’s own stores. Slowing consumer demand for Ugg boots continues to drag on this stock.

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