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3 Stocks for the Rest of 2012

Many investors, when first getting started, look back at what has been hot and then invest in it. But for retail trends, it's even more important to think about what those companies will do in the future. Here's a look at three of my favorite apparel retailers and where I think they're headed for the rest of 2012.

Wearing it like they mean it
Jeans seller Buckle (NYSE: BKE  ) has all the right attributes for a long-term stock: The management team is with the company for the long haul, its products are attainable while still being aspirational, and it has managed to grow sales steadily for the past decade.

However, Buckle is also the only company in today's lineup that hasn't beaten the S&P 500 in 2012, due largely to slow same-store sales. That's not something investors should just ignore like a small hole in the knee of their favorite pair of britches. July's same-store sales dropped 0.1%, which isn't so bad, but it's far from the sort of growth Buckle's competitors are posting.

Same-store sales at competitor True Religion (Nasdaq: TRLG  ) increased 2.4% over the company's second quarter. Unfortunately, True Religion had much higher expectations coming into 2012, and it has watched its stock fall 38% over the year.

But looking to the future of Buckle, I'm watching for two main things. First, while Buckle is a company I like for the long haul, in order for it to make sense as an investment, I want to see same-store sales consistently outpace the rest of retail. I think it can get back to that level of growth if it has a strong back-to-school push and a good holiday season. Finally, I want to see the company's store count continue to increase at its current pace. Twelve new stores have been opened over the last 12 months, and it aims to open five additional stores this year. If both of those work out, the company should finish the year in a strong position.

The khaki revolution
We've seen a much stronger 2012 from Gap (NYSE: GPS  ) . The stock is up an incredible 88% this year, as the company has finally come back around to working its strengths. Gap spent years trying to regain its position as a fashion-forward brand, only to drop the quality of its clothing and fall behind in its production capabilities. Under its new management team, Gap has streamlined its backroom operations, and it can now get trendy items onto the floor quickly.

That's helped it push its same-store sales figures way up. In July, Gap increased sales at comparable locations by 10%. That's the kind of growth that I'd love to see at any company, but it's even more refreshing to see at Gap, which has had such struggles. That 10% increase represents an acceleration, as well: Over the entire second quarter, same-store sales grew 4%, so finishing on a 10% increase gives the company excellent momentum for the rest of the year.

I want to see that momentum continue right on through the end of the year. At the end of August, same-store sales need to have continued to push ahead. We're entering the crucial back-to-school period, and Gap should be able to cash in on that demographic with its new-found confidence. If it can pull that off, then it should be fine for the rest of the year. Sales figures from August and September will be Gap's telltale metrics for 2012.

Jingle all the way
The final company I want to look at is Macy's (NYSE: M  ) . This is an unexpected win, from my perspective. I rarely shop at Macy's, and the company had flown under my radar until the other day, when I was looking at Kohl's (NYSE: KSS  ) . Kohl's saw a 3% drop in same-store sales over its second quarter, while Macy's saw a 3% increase. Unsurprising, then, that shares of Macy's have outperformed the S&P 500, while Kohl's has fallen behind.

For the rest of 2012, Macy's will be in a similar position to Gap. Sales will need to be very strong through the beginning of the school year in order to push strong sales in the holiday season. I would expect even more from Macy's than from Gap over the holidays. Macy's sells clothing, home stuff, and appliances. Sales of those big-ticket items can make or break the company in the winter. I'll be looking for close to a 5% increase in same-store sales over the third quarter, which would give the company enough push to cover the winter period.

The bottom line
All three companies are in control of their own fates through the rest of 2012. While economic pressures have been hurting the wider retail economy, these three chains have performed well regardless. Buckle is playing catch-up right now, but I really like its long-term prospects. Of the other two, Gap has my vote for the rest of 2012. With a forward P/E of 15, it's priced for growth, but not for explosion. I think that's a fair price.

As we approach the end of the year, it's time to start thinking about how your investments are doing and what you have planned for the coming year. Take a look at the Fool's report on middle-class millionaire-makers. These are three companies that, like Buckle, are easily understandable, but too small for the big guys to take notice of. Get all the details in your free report today.

Fool contributor Andrew Marder does not own any of the stocks mentioned in this article. Motley Fool newsletter services have recommended buying shares of The Buckle. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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Andrew Marder

Andrew Marder worked in retail for years, holding jobs ranging from bookseller to bank strategy analyst. He has worked for the Motley Fool since 2012, and loves coffee.

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