The consumer is back. Same-store sales for 25 major retail chains rose 1.7 percent March, overcoming the surge in gasoline prices and stubbornly high unemployment. Analysts had forecast a 0.7 percent dip.
Employment will continue to be an issue for months to come, but the shoppers who do feel more secure about their incomes are itching to spend, and those folks buy name brands. To take advantage of the rebound in consumer spending, you’d do well to consider the stocks of upscale apparel brands, such as Abercrombie & Fitch (ANF), Coach (COH) and Limited Brands (LTD).
Abercrombie & Fitch
The clothing company popular with teenagers saw its profit soar to $150.3 million last year from just $254,000 in 2009. Surging demand overseas and rebounding sales in the United States powered the increase.
Strong economic growth in many foreign nations should continue to boost sales there. “International expansion is the dominant theme at ANF, as it penetrates global markets with flagship stores for its A&F adult and kid business and in mall locations with Hollister,” writes Standard & Poor’s analyst Marie Driscoll, who has a four-star buy rating on the stock.
The luxury handbag and leather goods company reported a 26 percent rise in net income during its fiscal second quarter, ended Jan. 1, to $303.4 million from $241 million in the year-earlier period. Upscale consumers’ willingness to loosen their purse-strings again is helping. Sales in China are surging at double-digit rates.
Analysts at Channel Trend predict the stock will outperform the market over the next six to 12 months. That forecast is based on Coach’s strong operating and financial condition and the past performance of its stock.
Limited, which has six brands including Victoria’s Secret and Bath & Body Works, garnered profit of $805 million in the year ended Jan. 30, up 80 percent from $448 million a year earlier. Nearing a saturation point in the United States, it is taking steps to expand overseas.
Analysts at Market Edge Research have a buy rating on Limited.
“Operating margins are improving and operating cash flow remains positive,” they write. “Demand for the company’s products and services has been strong, as sales for the last quarter grew 12.81 percent to $3.46 billion.”
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