The holiday season of 2008 may go down in history as one of the biggest nail-bitters in the last few decades. Motley Fool analysts have assessed the state of retail going into this critical season -- the stocks, sales strategies, consumer trends -- and identified the winners and losers at the mall and in investors' portfolios. Click here for the complete report.
When I recently stood in the Gap (NYSE: GPS ) , I felt overwhelmed by burgeoning inventory and a sort of sad sameness. This brings me to a retail strength that shouldn't be underestimated, even in a deep recession: being different.
Here are a few that I don't think fit the bill and will have difficulties in the current climate. I have a hard time differentiating between Gap's goods and those of its lower-priced counterpart, Old Navy. Even when Gap was hot, its bread and butter consisted of fairly uniform fare, such as khakis. I also have a hard time differentiating between the merchandise I see in, say, Abercrombie & Fitch (NYSE: ANF ) , American Eagle Outfitters (NYSE: AEO ) , or Aeropostale (NYSE: ARO ) (other than the companies' logos splashed across the clothes, or what I've heard about variations in price and fabric quality or craftsmanship).
I suspect that when shoppers feel like spending money, they're not just going to look for rock-bottom deals. Instead, many may spend less overall but when they do shop, gravitate towards clothing that reflects individual spirit, and there are increasing signs that the herd mentality is no longer "in." I don't think the opiate for a depressing economy is conformity -- I mean, come on, looking like a clone is depressing and dystopian in its own right.
When it comes to an individualistic niche done right, Urban Outfitters (Nasdaq: URBN ) , a company I have followed for years, is best in class. The company -- and its other concepts and brands, Anthropologie, Free People, Terrain, and Leifsdottir -- deliver unique fashions to people who have no interest in looking like everybody else.
This niche spirit is in the company's DNA. In fact, Urban Outfitters' management plans to limit how many total stores it opens for each of its concepts so that it can retain a more boutique feel and individualistic spirit. You see why this is so not Gap? Browse its shops or catalogs and you'll encounter authentic edginess and individualism, not the flavor of the month. Growth will continue through newer concepts; for example, Free People, Terrain, and Leifsdottir are in their infancies.
Granted, there's some rather bohemian looking merch in places like Macy's (NYSE: M ) at the moment, which says to me that many retailers figure standing out in the crowd may help them grab scarce holiday dollars. But Urban Outfitters has made such styling part of its mission. It's been at it for a long time; it has studied its core customers with anthropological zeal and knows them well. It's not just going wherever the wind blows, or offering just another sea of hoodies.
These are tough times, but they yield a historical opportunity for investors to look for the best companies and get their stocks at discounts. Urban Outfitters' stock has been beaten down mercilessly even though its financial results have been incredibly robust in this heinous consumer spending environment. This niche player is hitting on all cylinders now and is built for the long term, too.