This week, some apparel and accessory producers and retailers offer a look at how they've been doing between early summer's economic stimulus spending and the coming holiday season. While Polo Ralph Lauren Corp. (NYSE: RL) reported higher earnings last week, Coldwater Creek Inc. (NASDAQ: CWTR), Eddie Bauer Holdings Inc. (NASDAQ: EBHI), Kenneth Cole Productions Inc. (NYSE: KCP), and K-Swiss Inc. (NASDAQ: KSWS) all reported net losses as consumers pulled back on spending over the summer due to higher fuel prices and other economic worries. The expectations of analysts surveyed by Thomson Financial for such companies scheduled to report this week don't look much different; i.e., a bright spot or two among lower expectations overall.
Hip retailer Urban Outfitters Inc. (NASDAQ: URBN) is expected to post earnings 22.9% higher than a year ago, to $0.35 per share, on revenue of $475.9 million (+26.4%). The Philadelphia-based company already said that same-store sales in the quarter were 10% higher. Urban Outfitters has beat expectations in recent quarters, by 11.5% in the previous quarter, and analysts on average recommend buying URBN. Shares fell to a 52-week low of $16.61 per share on Friday, and are down 29.5% from a year ago. Other companies expected to report more modest earnings growth in the coming week include watch and accessory maker Fossil Inc. (NASDAQ: FOSL), retail giant Wal-Mart Stores Inc. (NYSE: WMT), and TJX Companies Inc. (NYSE: TJX), parent of such discount retail chains as T.J. Maxx and Marshalls. These three companies have tended to top analysts estimates in recent quarters, and Fossil and TJX ended the week near their 52-week lows.
While Los Angeles-based American Apparel Inc. (AMEX: APP) had a strong second quarter, the casual wear maker is expected to report $0.13 per share earnings for the third quarter, the same as in the year-ago period. And analysts anticipate that Kohl's Corp. (NYSE: KSS) will report that profits fell 16.4% to $0.51 per share on revenue of $3.9 billion (+1.9%). Though same-store sales for October fell 9%, the Menomonee Falls, Wis.-based company reaffirmed its third-quarter forecast. Kohl's has offered positive surprises in recent quarters, topping estimates by 5.6% in the previous quarter. The consensus recommendation remains to buy KSS. Shares have been climbing after reaching a 52-week low in late October, but are still down 32.8% from a year ago.
Philip Morris (NYSE: PM) was upgraded to Outperform from Neutral at Credit Suisse.
Friedman Billings upgraded shares of Principal Financial (NYSE: PFG) to Market Perform from Underperform as they believe the company's capital buffer could keep outrunning credit losses.
Friedman Billings also upgraded Office Max (NYSE: OMX) to Outperform from Market Perform. The firm believes the risk of recourse to Office Max from the Timber Notes formerly backed by Lehman is low and that any litigation by noteholders will have a low level of success.
Citigroup upgraded CF Industries (NYSE: CF) to Buy from Hold on valuation following the recent weakness but lowered their target to $113 from $128.
Analog Devices (NYSE: ADI) was upgraded to Buy from Neutral at Merrill Lynch.
TheStreet.com's Jim Cramer says with gas coming down further, the coming rally could be broad and fierce.
The great hurricane fakeout leaves us with oil much lower than it began, having launched itself from $112. Now that the $110 level's been breached and natural gas has gone as low as $7.50, we can begin to put together a holiday scenario that might -- just might -- explain the incredible run in retail that's been going on.
The presumption in retail, if you use Wal-Mart (NYSE: WMT) (Cramer's Take) as retail, was that once the stimulus wore off, presumably last month, the stocks would get hammered. On Aug. 7, Wal-Mart as much as told you that, and the stock dropped to $57 from $60.90.
Ever since then, it has been creeping up. Kohl's (NYSE: KSS) (Cramer's Take) dropped a point from that warning, going from $45 to $44. It is now at $49. Macy's (NYSE: M) (Cramer's Take) went from $19.80 to $18.90 before bouncing to $20.82. Jones (NYSE: JNY) (Cramer's Take) went from $17.40 to $17.20 before roaring to $19.80. Ralph Lauren (NYSE: RL) (Cramer's Take), because of a great quarter, didn't even get hurt, rallying from $67 to $75.
AIG (NYSE:AIG) Cut to Market Perform at FBR, according to24/7 Wall St. The financial website also reported VMware (NYSE:VMW) Started as Underperform at Bernstein and Polo Ralph Lauren (NYSE:RL) Raised to Outperform at Morgan Keegan.
Credit Suisse downgraded Avon (NYSE:AVP) to Neutral from Outperform, according toBrieifing.com. The news service also reports that Jefferies downgrade UTStarcom (NASDAQ:UTSI) to Underperform from Hold.
Polo Ralph Lauren (NYSE: RL - option chain) shares are trading higher today after the company posted first-quarter earnings of $95.2 million, or 93 cents per share, blowing analysts' estimates of 72 cents per share out of the water. RL also lifted its full-year earnings forecast to a range of $4.00 to $4.10 per share, from previous guidance of $3.95 to $4.05 per share, above analysts' expectations $3.98 per share. It is looking like the slowing economic situation is not hitting RL that hard, which could also be a good sign for other high-end retailers as well. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on RL.
RL opened this morning at $66.00. So far today the stock has hit a low of $63.90 and a high of $66.66. As of 12:45, RL is trading at $65.78, up $4.28 (6.9%). The chart for RL looks neutral and S&P gives RL a 3 STARS (out of 5) hold ranking.
For a bullish hedged play on this stock, I would consider a September bull-put credit spread below the $55 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 7.5% return in just seven weeks months as long as RL is above $55 at September expiration. Ralph Lauren would have to fall by more than 16% before we would start to lose money. Learn more about this type of trade here.
With a turn of the calendar page, we drift into the middle portion of the current quarter, but the earnings season rolls on. Among the many companies scheduled to report quarterly results this coming week are Time Warner Inc. (NYSE: TWX), Cisco Systems Inc. (NASDAQ: CSCO), News Corp. (NYSE: NWS), and Whole Foods Market International (NASDAQ: WFMI). Let's take a look at which companies Wall Street analysts are expecting to be among the top earnings gainers and decliners this week.
Analysts surveyed by Thomson Financial expect the following to report strong earnings growth when compared to the same period of the previous year.
Since January 2001, the dollar has lost much of its value. It's fallen 71% in value from the 92 cents to the Euro at which it traded back then. This is great news for Europeans who have a chance to come to the U.S.
I am teaching a group of students from Italy this month. Their friends advised them to come to the U.S. with empty suitcases so they could fill them up with clothing and other retail goods. That's because when they come here, the clothing that they buy in Europe looks to be on a 50% off sale. This leads to what may be an investment opportunity for Americans -- Polo Ralph Lauren (NYSE: RL). (Its stock is not overpriced; it's lost 39% of its value in the last year and it trades at a price earnings-to-growth (PEG) ratio of 1.2 -- a P/E of 15.7 and earnings forecast to grow 12.8% to $4.51 in 2009.)
How so? The Italian students are eager to gobble up as much of its merchandise as they can. If these students are a microcosm of Europeans, we can expect them to flock to the East Coast of the U.S. during their summer break to boost their wardrobes. They also like Lacoste and Gucci as well -- both of whose products are selling at screaming discounts here for those who get paid in Euros.
Polo Ralph Lauren Corporation (NYSE: RL) is engaged in the design, marketing, and distribution of apparel, accessories, home furnishings and fragrances. These are offered under such brand names as Polo Ralph Lauren, Safari, Black Label, Club Monaco and Rugby. The company operates over 300 Ralph Lauren, Club Monaco, and Rugby retail stores, as well as a pair of e-commerce sites. Its products are also carried by upscale and mid-tier department stores. Macy's (NYSE: M) and Dillard's (NYSE: DDS) account for more than a third of all wholesale revenue. Jones Apparel Group (NYSE: JNY) and Liz Claiborne (NYSE: LIZ) are competitors.
The company pleased investors late last month, when it reported fiscal Q4 EPS of $1.00 and revenues of $1.24 billion. Analysts had been looking for 65 cents and $1.15 billion. Management also guided FY09 EPS to $3.95-$4.05 ($3.97 consensus). Needham subsequently reiterated its "buy" rating on the shares and boosted its price target to $79.
We saw another late day move save the markets today from looking like just one more mixed post-holiday trading session. The highly volatile durable goods orders came in at -0.5% for April, based partly on severe declines in aircrafts and autos. Any reprieve in oil was just that, some reprieve but no cure. We also saw the 10-Year Treasury cross back above that 4.00% threshold again. FOMC governor Mishkin also announced that he would retire in August, although this was non-moving for the market. Below are the unofficial closing bell levels:
Akeena Solar Inc. (NASDAQ: AKNS) saw a monster volume spike early on after boutique research firm Kaufman Bros. initiated coverage on the speculative solar stock with a Buy rating. More interesting than the research call itself was the overall level of volume right at the open that saw follow-on interest throughout the day as shares were up nearly 16% at $6.83 in the final minutes today.
American Eagle Outfitters (NYSE: AEO) saw a 9% rise by the final minutes of the trading day to $18.79 after its earnings came in above some expectations.
JCPenney (NYSE: JCP) shares are trading higher after Polo Ralph Lauren (NYSE: RL) announced that its fourth-quarter profit jumped 41% to $1 a share, well above analysts' estimates of 65 cents per share. RL's results were helped by the launch of the American Living line at JCP, which shows that shoppers are still buying at department stores. Also, other positive retail results from stocks like Dollar Tree (NASDAQ: DLTR) are also lending a hand. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on JCP.
After hitting a one-year high of $82.49 in June, the stock hit a one-year low of $33.27 in January. JCP opened this morning at $41.16. So far today the stock has hit a low of $40.68 and a high of $42.18. As of 1:00, JCP is trading at $40.91, up $0.41 (1.0%). The chart for JCP looks bullish but deteriorating, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bullish hedged play on this stock, I would consider an August bull-put credit spread below the $30 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 5.3% return in just three months as long as JCP is above $30 at August expiration. JCP would have to fall by more than 27% before we would start to lose money.
JCP hasn't been below $33 at all in the past year and has shown support around $38 recently. This trade could be risky if the company's earnings (due out in mid August) disappoint, but even if that happens, this position could be protected by the support the stock might find around $28, where it bottomed out in March and April.
Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in JCP, RL, or DLTR.
I know, I know, with the economy sputtering, why would you ever want to be invested in an apparel company that produces expensive jeans? Let alone have it recommended by a typically short-selling trader like me! But before I tell you the name of this stock that despite the obvious economic problems -- strong oil, weak housing and the dollar, mounting foreclosure, etc -- is sitting right near all-time highs, looking to break out, let's do a quick rundown of its competitors in the apparel retail space.
Father's Day is around the corner. Why not spend some time looking at the coming earnings and how Dad's Day may have an impact. It is funny to see how many of the companies reporting earnings this week actually have links to Father's Day.
While this column has been obviously bearish of late, there are a few potential winners that may appear, just in time for the big day. Time to stock up on gifts for dear-ole-dad, or get farther away from stocks? You tell me... (by the way, comments and ideas are always appreciated)
Monday, May 26
Markets will be flat. I am certain that stocks on the U.S. Market will close at the exact price they closed last Friday. But what do I know!
While the earnings season is beginning to wind down for the current quarter, there are still plenty of results to come. Here's a peek at what analysts surveyed by Thomson Financial are expecting from companies scheduled to report results in the final week of May 2008.
These companies are expected to post earnings growth, compared to the same period in the previous year:
Dell Inc. (NASDAQ: DELL) down 2.9% to 33 cents per share, on $15.66 billion in revenue
TiVo Inc. (NASDAQ: TIVO) is expected to swing to a loss of a penny per share, compared to a penny profit a year ago, and report $55.62 million in revenue. And analysts expect Borders Group Inc. (NYSE: BGP) to narrow its loss 7.8% to 47 cents per share, on $801.11 million in revenue.
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Here are some highlights from this past week's 
With a turn of the calendar page, we drift into the middle portion of the current quarter, but the earnings season rolls on. Among the many companies scheduled to report quarterly results this coming week are 
I know, I know, with the economy sputtering, why would you ever want to be invested in an apparel company that produces expensive jeans? Let alone have it recommended by a typically 
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Bush administration ignored regulators' warning of mortgage meltdown
Cramer on BloggingStocks: Any downside should now be muted 
Citigroup bailout sheds light on just what the taxpayers are buying
