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 203 retail stores, a catalog business, a Web site and 63 factory outlet stores. 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 month, when it reported Q4 EPS of 41 cents (ex-items). That topped the average Street estimate by two cents. Revenues rose 53.5% (yr/yr) to $399.9 million ($400.9M consensus). Gross margins improved 50 basis points to 41.3% and operating margins increased 60 basis points to 10.8%. Management guided FY09 EPS to $1.85-$1.87, versus consensus of $1.83.
The news
kept JCG shares cycling through a positive five-week trading channel. The price is currently consolidating near the base of that channel, suggesting the potential for a rise back toward the top. Correspondence of the stock's 30-day and 50-day moving averages to the base of the channel backs the rebound notion.
Brokers recommend the shares with two "strong buys", three "buys" and nine "holds". Analysts expect a 22% average annual growth rate, through the next five years. The JCG Sales Growth rate (53.45%), EPS Growth rate (18.18%), Return on Assets (20.15%), Return on Investment (31.90%) and Return on Equity (133.03%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 91% of the outstanding shares. Over the past 52 weeks, the stock has traded between $33.69 and $57.17. A stop-loss of $38.35 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.
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