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Here's a stock I've been wrong about. I've been bearish on J. Crew Group (JCG), as this previous article will indicate. But since the latest quarterly results show a vast improvement of the retailer's fundamentals, I guess you could say I was decidedly behind the curve.
According to the earnings release, revenues increased 14% in the third quarter. Same-store sales advanced 8%. Net income more than doubled to 67 cents per diluted share. A lot of this good news was expected, as Trey Thoelcke pointed out in his earnings preview. Still, the bottom line beat the analysts by several pennies. And you've got to love the increase seen in the gross margin.
Okay, like I said, I was wrong about J. Crew. So, what should I do now? Should I just go out and buy the stock?
I'm leaning toward calling the retailer a buy, but I can't say it's a "solid" buy. If I turn out to be wrong about that, maybe I can be forgiven. Shares rose over 7% in Tuesday's after-hours session. If this rally carries over into Wednesday's regular trading period (which I think it will), then I'm sure it's understandable to most that buying into the excitement would probably be a little early. There's nothing wrong with waiting until the stock settles for purposes of starting out at a better costs basis.
The other element you need to consider is risk. We're getting closer to the new year. What happens if the market movers begin to change their current bullish strategies? What if they start discounting another downturn in the economy? It's something to keep on your radar.
Definitely put J. Crew on your idea list. The retailer will be in stiff competition with Gap (GPS), JCPenney (JCP), Abercrombie & Fitch (ANF), and other rivals this Christmas season. The festivities are set to begin this Friday. I can't wait to see how the malls do over the holiday weekend.
Disclosure: I don't own any company mentioned; positions can change without notice.
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