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One of the more popular retail apparel business models aims to satisfy the fashion sense of young managerial types. One of the more successful practitioners of the art is headquartered on Broadway.
J. Crew Group (NYSE: JCG) is a multi-channel retailer of women's and men's apparel, shoes and accessories. Known for its preppy fashions, the firm targets young professionals through 186 retail stores, a catalog business, a Web site and 53 factory outlet stores. It also has more than 40 shops in Japan, through a joint venture with Itochu. Asian contractors produce about 80% of the company's merchandise. Competitors include Gap (NYSE: GPS) and Abercrombie and Fitch (NYSE: ANF).
The company pleased investors last week, when it reported Q1 EPS of 39 cents and revenues of $297.3 million. Analysts had been looking for 30 cents and $270.4 million. Management also guided Q2 EPS to 26-28 cents (28 cent consensus) and boosted FY07 EPS expectations from $1.27-$1.31 to $1.37-$1.41 ($1.32 consensus).
JCG shares popped into a bullish "pennant" consolidation pattern on the news. Prices frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.
Brokers recommend the shares with one "strong buy," two "buys" and 10 "holds." Analysts expect a 25% growth rate, through the next year. The JCG Sales Growth rate (23.53%), EPS Growth rate (232.95%), Return on Assets (24.21%) and Return on Investment (37.26%) compare favorably with industry, sector and S&P 500 averages.
Institutional investors hold about 65% of the outstanding shares. Over the past 12 months, the stock has traded between $24.10 and $50.84. A stop-loss of $43 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.
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