Popular Fashion Stocks
Fashion Stock Market Tips
Investing in clothing retailers can be a risky business due to the fickle nature of the fashion industry . As an investor, you are dependent not merely on the economy but on human tastes that change like crazy. Take these tips into account before investing:
Investing in a brand because you love it is okay…only if it's an educated investment.
Visit the stores
Examine gross margin trends
Study inventory/receivable trends
Compare P/E ratios vs. expected earnings growth rates
Examine geographic footprint
Other Clothing Stocks
Clothing Stock Tips
Here are some tips worth considering before you go investing in clothing stocks:
Visit the Stores
Visit the store; check the look and feel of the products for yourself. Use your judgment. (Peter Lynch actually discovered Hanes stock because his wife came home from the store freaking over egg-shaped containers of stockings, called L'Eggs!) While visiting, analyze their promotional activities. Is the company promoting its merchandise to drive foot traffic or earnings? When companies desperately sell their products at deep discounts at the end of a season, margins and earnings are often negatively affected.
Examine Gross Margin Trends
decline in gross margins (either sequentially or year-over-year)
should be a serious red for an investor. Examine gross margins and
make sure they are growing before investing.
Examine Same-Store-Sales Data
how a store fares on a period-to-period basis and is arguably the
most important metric in retail sales analysis.
Examine Inventory/Receivable Trends
When inventories grow at a faster rate than revenues, it’s likely due to the company’s inability to sell certain merchandise. Investors should be checking in on sequential and year-over-year trends in both inventories and accounts receivable to ensure that they are growing at the same pace as revenues.
Compare P/E Ratios Vs. Expected Earnings Growth Rates
companies are those that trade at an earnings multiple that is less
than the expected growth rate. These companies may be worth a further