The women from “Sex and the City” shoved Indiana Jones out of summer blockbuster contention with more than $55 million in weekend movie box-office sales. As retail stocks headed lower in opening trades Monday ahead of May’s sales reports, I thought this would be the perfect time to start shopping for apparel stocks.
While many of us aren’t quite ready to fork over hundreds of dollars for a new pair of shoes, Warren Buffett has gone on record as saying that he is comforted by the fact that some 50 million Americans will use a Gillette product to help them shave and shower every morning. Needless to say, the “Oracle” of Omaha has made a killing on Gillette and other retail stocks!
If investors can get past the headlines decrying the credit crunch, housing crisis or rising gas and food prices and just focus on some of the simple things they do every day, you will find a diverse universe of investment opportunities.
Bargain Basement Stocks
Today, let’s look at some bargain basement stocks avid shoppers may want to buy for their portfolio.
• Oxford Industries (OXM) is an international apparel design and marketing company with a diverse portfolio of brands under a host of different recognizable names like Tommy Bahama® and Ben Sherman®. OXM’s shares have risen off their lows of late, but still trade for just 10 times earnings, 40 percent of sales and slightly above book value. 52-week price range $19.77 – $46.38.
• Liz Claiborne (LIZ) designs, markets and sells a range of women’s, men’s and children’s apparel and accessories. Shares are well off their 52 –week high of $38.90 and trade for just 36 percent of sales and 10 times ’09 earnings. The company recently entered into an exclusive long-term global licensing agreement to manufacture, distribute and market Liz Claiborne fragrance brands with Elizabeth Arden (RDEN). Elizabeth Arden expects the deal to boost sales and earnings growth in fiscal 2009 and add to earnings in the first half of fiscal 2009. Liz Claiborne also sees the deal bolstering earnings and operating margin in 2009.
• VF Corp. (VFC) has a strong presence in active wear and outdoor and performance-oriented apparel. Earlier this year, the company acquired Portland-based Lucy, and has plans to significantly expand the number of Lucy stores, which now number 60 nation-wide. VCF shares trade for just 11 times ’09 estimates and yield over 3 percent.
• Phillips Van-Heusen (PVH) designs and markets a variety of apparel and is particularly strong in dress shirts and sportswear. Of particular note, is the strength PVH has seen from its Calvin Klein licensing business, which experienced a 28% pop in operating income on a year-over-year basis. Shares trade well off their 52-week high of $61.93 and for slightly less than one times sales. The company’s near-50% gross margin attests to the strength of the company’s brands and core businesses.
• Jones Apparel Group (JNY) and its stable of top-name brands include Anne Klein, Gloria Vanderbilt, Jones New York and Nine West. JNY shares trade for just 38 percent of sales, 72 percent of book value, and about 12 times ’09 estimates while yielding 3.4 percent. 52-week price range of $12.40–$30.45.
While mass-market discounters like Wal-Mart (WMT) and Costco (COST) are making in-roads with customers searching for the lowest price during tough economic conditions (see, “World Take Over By Wal-Mart and Costco”)these brand-name stocks won’t be in the retail stock bargain bin for long.
Jamie Dlugosh
Editor, InvestorPlace
