FASHION AND CLOTHING STOCKS
Fashion and clothing stocks can be extremely lucrative if properly researched. Then practice what you’ve learned with our free stock market simulation.
POPULAR FASHION STOCKS
Restaurant stocks sitting comfortably at the top of the food chain:
|KORS||MICHAEL KORS HOLDINGS LIMITED|
|RL||RALPH LAUREN CORP|
|SHOO||STEVEN MADDEN LTD|
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
Some known clothing stocks:
|GPS||MICHAEL KORS HOLDINGS LIMITED|
|LB||RALPH LAUREN CORP|
|TGT||STEVEN MADDEN LTD|
|AEO||AMERICAN EAGLE OUTFITTERS INC|
|UA||UNDER ARMOUR INC|
|GIL||GILDAN ACTIVEWEAR INC|
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
A 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
This data reveals 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
“Cheap” companies are those that trade at an earnings multiple that is less than the expected growth rate. These companies may be worth a further look.
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