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 198 retail stores, a catalog business, a Web site and 61 factory outlet stores. It also has more than forty shops in Japan, through a joint venture with Itochu. Asian contractors produce about eighty percent 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 Q3 EPS of 42 cents and revenues of $332.7 million. Analysts
had been looking for 36 cents and $312.3 million. The CEO cited strength in both the store and direct businesses for the solid results. Management also guided FY08 EPS to $1.50-$1.52, versus consensus of $1.46. The share price popped on the news and then moved into a bullish "flag" consolidation pattern. Stocks frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Brokers recommend the shares with one "strong buy," two "buys" and eleven "holds." Analysts expect a 25% growth rate, through the next year. The JCG PEG ratio (1.13), Sales Growth rate (20.75%), EPS Growth rate (55.56%), Return on Assets (25.08%), Return on Investment (40.91%) and Return on Equity (420.32%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 84% of the outstanding shares. Over the past 52 weeks, the stock has traded between $33.50 and $57.17. A stop-loss of $41.95 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.
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