Monday, March 17, 2008

Opportunities in a recession?

The US economy has certainly seen better days: projected economic indicators are pointing towards lower consumer spending and resulting weaker sales in consumer-cyclical spaces. This downward pressure on retail has already crushed market values of many specialty retail firms (See Saks: SKS, Nordstrom:JWN, Ralph-Lauren:RL). None of these declines have found any significant support, however from a value perspective, many of these firms still have incredible growth potential. At lower valuations, firms like Macy's (M) are looking much cheaper at PE's near 10. As stores like Nordstrom continue to open new stores throughout the US, they are posed to capture a significant amount of sales growth in the next 3-5 year period. American Apparel's (APP) earnings report give us some hope that brands capturing a younger market may still be able to maintain positive sales growth in the coming months. Additionally, strong foreign currencies in both Asia and Europe may allow designer brands to continue to overstep the US retail slump. Do you have any fashion value plays brewing in your head?

Related Articles:

Retail sales data heightens recession fears (FT)

"With the housing market in turmoil amid rising foreclosures, rising energy prices, and a deteriorating job market, discretionary spending by consumers appears to be slowing sharply. The resilience of the US consumer in the face of such challenges was one of the trademarks of the economy last year."
Soft NZ Jan retail sales slow NZ economy
"Soft retail sales are the latest piece of data revealing slowing in the domestic economy. January's retail sales rose by a seasonally adjusted 0.3%, as expected and following a 0.1% rise in December, largely due to a 2.1% increase in supermarket and grocery store sales. Excluding vehicle-related industries, the core retail figure was also an increase of 0.3%, against expectations of a 0.1% decline."
Singapore shares close higher on strong retail sales data(CNN/MONEY)
"Retail sales rose 7.8 percent in January from a year earlier, helped by higher fuel prices. The increase beat the 3.2-7.6 percent growth forecast by economists polled by Thomson Financial."
American Apparel Reports Fourth Quarter and Full Year 2007 Financial Results (BusinessWire)
"American Apparel reported unaudited consolidated net sales for the quarter ended December 31, 2007 of $111.2 million, a 48% increase over sales of $75.1 million for the quarter ended December 31, 2006. Retail sales increased 85% to $68.3 million for the fourth quarter of 2007 as compared to $37.0 million for the same period in 2006, with same-store sales for stores open at least 12 months rising 40%. Wholesale sales were $42.9 million for the 2007 fourth quarter as compared to $38.1 million for the 2006 fourth quarter, an increase of 13%. American Apparel ended the quarter with 182 stores, having added 19 net new stores in the period."


Flood Pants said...

i am going to find a fasion 'play', let me get back to you in three months. im not joking.

But for right now i would be closely eyeing long bonds and CDS spreads(using the bloomberg) on Fed member banks. the shit hasn't even hit the fan yet.

also check this out

and this, especially this

Flood Pants said...

damn thing cut my second link out. here is the remainder