Big Gains, Steep Losses for Industry Stocks in June

Retail apparel stocks beat the Dow in June, and in a reflection of what’s playing out every day in the apparel marketplace, the winners won big and the losers tanked almost as precipitously. The Dow Jones Industrial Average rose 0.7% in the month, bringing its year-to-date gain to 1.5%. Apparel retail stocks saw prices rise an average of 2.7%, bringing their year-to-date decline to 4.3%.

StockNewGainersLosers

American Apparel (APP) was the big gainer in the month as the battle for the Made in USA clothing chain heated up. On June 18, the company’s board fired Founder and CEO Dov Charney, citing an ongoing investigation into inappropriate sexual conduct (over the years, Charney has been the subject of several sexual harassment lawsuits filed by employees). Soon afterward, Charney who owned 27 percent of the company prior to his ouster, reportedly increased his stake in the retailer to 43 percent with the help of a loan from financial firm Standard General. American Apparel’s board adopted a poison pill shareholder rights plan to prevent Charney from making a hostile takeover bid.

Express Inc. (EXPR) shares soared after it was revealed that private equity firm Sycamore Partners wants to acquire the retailer. Earlier in the month, the specialty chain’s stock had been downgraded to “strong sell” in response to disappointing first quarter sales and earnings and a guidance cut for the fiscal year.  Sales declined 10 percent from the prior year quarter to $460.7 million, and missed consensus estimates of $481 million. Earnings fell 84 percent to $0.06 per share from the prior year quarter’s $0.38 per share, missing company guidance, and were 57 percent short of the $0.14 per share Wall Street estimated. The retailer announced plans to close 50 stores in the next three years.

Vince Holdings (VNCE) rose by almost 32 percent in the month, after reporting sales and earnings growth that exceeded expectations and an upgrade to full-year guidance. Net sales grew by 32.4% to $53.5 million in the quarter, with a comp sales gain of 11 percent. Earnings swung from a loss of $15 million in the first quarter of 2013 to a profit of $1.4 million, or $0.04 per share, this year. Adjusted for costs relating to its IPO last year, the 2013 first quarter was about break-even. The company is adding childrenswear and men’s footwear, and plans to open seven or eight new stores by the end of the year.

Women’s apparel specialty chain Christopher & Banks (CBK) jumped 28.4% on first quarter results that beat analyst expectations, confirmation that it was on track to deliver on its three-year growth plan. Total sales for the quarter disappointed, down 4.7% to $103.4 million. Improved merchandise margins were responsible for most of the gains. Gross margin expanded by 250 basis points.

UnderArmour (UA) continued to rock the athletic space with a stock price gain of 17.1% in June after several analysts, including Jefferies’ Randal Konik and the team at Citicorp, upgraded their rating on the stock to “buy.” Revenues at the athletic apparel and footwear firm rose by 36 percent in its latest quarter to $642 million, and net income surged 73 percent to $13.54 million. The company announced it would open its newest Brand House retail store at 600 North Michigan Avenue in Chicago next March. Current Brand House locations include Tyson’s Corner, VA and Manhattan’s SoHo neighborhood. The stores focus on cutting-edge products and designs in an exciting, interactive environment that provides an immersive brand experience to consumers. The Chicago store will be the brand’s largest to-date, at 30,000 sq. ft., and will fortify the brand’s deep connection to Chicago and the surrounding region, including its partnerships with Northwestern University, University of Notre Dame, the Chicago Cubs, and other iconic athletic institutions.

Quiksilver (ZQK) wiped out in June, dropping almost 40 percent after the company reported its fiscal second quarter results, which were devastated by deteriorating wholesale revenue. The company widened its loss to $46 million, or $0.27 per share, from $33 million, or $0.20 per share, one year earlier. Excluding one-time items, the loss was $0.15 per share, much more than the $0.02 expected by analysts. Sales dropped by about 11 percent to $408 million, also missing estimates. The surfwear space has become highly price-sensitive and competitive. Wholesale comprises 70 percent of company revenue.

Bebe Stores (BEBE) dropped by almost 26 percent in June amid heavy insider selling and analyst downgrades following the less-than-impressive first quarter results it reported in May. The company announced it would exit its unprofitable “2b bebe” business in which it sells affordable apparel and accessories, resulting in a pretax charge of about $5 million, but will save about $4 million in fiscal 2015. Jim Wiggett took over as the company’s interim CEO after Steve Birkhold resigned from the post.

ALCO Stores turned in a disappointing first quarter. Net sales dropped 4.1% to $104.7 million, as comps dropped 7.1%. The loss for the quarter was $8.1 million, or $2.49 per diluted share, compared to $1.7 million, or $0.51 per share, in the prior year quarter.

Coach’s (COH) troubles continued last month after several analysts, including Sterne Agee’s Ike Boruchow, downgraded the stock from “buy” to “neutral,” citing Coach’s deteriorating North America business. The company announced it would close 70 underperforming stores in the next year, and will begin discounting handbags at its U.S. full-line stores during twice yearly sales in January and June. Previously, the company discounted only in its outlet stores. Coach has struggled with competition from Michael Kors, Kate Spade, Tory Burch and other brands. So far this year, both sales and earnings have underperformed expectations. Fiscal third quarter revenue dropped by 7 percent to $1.1 billion, and earnings fell 19 percent.

PVH slid 11.4% after the owner of Calvin Klein and Tommy Hilfiger announced worse-than-expected first quarter results and lowered its full fiscal year outlet. Total revenue rose 4 percent to $1.96 billion, and profit fell to $122.1 million, or $1.47 per share, from $155.6 million, or $1.91 per share. Analysts expected earnings of $1.49 per share on $1.97 billion in revenue.


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