In Search of Retail Outliers

Recent quarterly news from retailers has underlined that many are still struggling. Although some have beat profit expectations, their revenue and same-store sales data have told the tale that customer traffic is flagging. However, a few retailers have been displaying remarkable resilience, and they're good for investors' watch lists.

When "better" isn’t really that great
If you've missed the trend I'm speaking of, look no further than Gap's (NYSE: GPS  ) quarterly results, released last night after the market closed. Although it beat analysts' expectations by a penny, first-quarter net income fell 14%, to $215 million, or $0.31 per share. Revenue fell 7.4%, to $3.13 billion, and same-store sales dropped 8%. Comps at its long-struggling Old Navy chain dropped "only" 3%, which is an improvement to the 18% plunge at this time last year. Furthermore, Gap's gross margin was flat in the quarter.

It's not exactly heartening, even if it's better than analysts thought Gap could achieve.

Of course, Gap's less-than-exciting tidings aren't exactly the exception to the rule in retail lately. For example, Whole Foods Market's (Nasdaq: WFMI  ) latest quarter followed the "better-than-expected" theme, and Target's (NYSE: TGT  ) unsurprising earnings story came in a similar vein.

It is an ugly time, with consumers fretting about job losses and trying to pay down debt and amass savings, so lackluster profits and sales from retailers don't seem like a shocking state of affairs. However, more interesting is that two retailers in particular have been doing really well, despite the ugly macroeconomic environment.

Different than the rest, in a good way
Teen retailer Buckle (NYSE: BKE  ) blew my mind with its most recent quarterly results. First-quarter net income surged 44%, to $26.9 million, or $0.58 per share. Revenue increased 24.6%, to $199.7 million, and same-store sales soared 17.7%.

Another teen retailer, Aeropostale (NYSE: ARO  ) , has also shown the remarkable ability to buck the trend. Although it beat analysts' estimates by only a penny, the quarter was still remarkable. First-quarter net income surged 81.1%, to $31.7 million, or $0.47 per share. The quarterly results even included a $0.02 charge related to the closure of Aeropostale's Jimmy'Z concept.

Aeropostale's revenue jumped 21%, to $408 million, and same-store sales leapt 11%, and that's on top of last year's 10% increase in comps.

High-fashion stocks for the long term
Buckle and Aeropostale's performances aren't that big of a surprise either; last January I noted that these two retailers were holding up surprisingly well in the ugly macroeconomic climate, and it wasn't even a particularly new development then. (Here's an article from last September that also illustrates the recurring positive theme with these two retailers.)

Another reason to find Buckle and Aeropostale fashionable is that both have cash on their balance sheets and no debt.

There's really something to be said for their consistent success, what with so many retailers weighed down with debt, struggling with turnarounds that pre-dated the ugly macro environment, and hard-pressed to get customers in the door.  Why mess with Hot Topic (Nasdaq: HOTT  ) , which is showing signs of cooling off, or Abercrombie & Fitch (NYSE: ANF  ) , which is experiencing a major slowdown in sales?

Buckle and Aeropostale are two retailers that are really doing something right, given their stellar results, and that makes them great stock ideas for investors.

Check out some related Foolishness:

Whole Foods Market is a Motley Fool Stock Advisor pick. Strap on the feedbag at any of our Foolish newsletters today, free for 30 days.

Alyce Lomax owns shares of Whole Foods Market. The Fool has a disclosure policy.


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