The Best Mall Retailer with the Most Upside for 2014

Despite the fickleness of the apparel industry, this retailer could be a solid investment for 2014.

Jan 24, 2014 at 11:04AM

Mall traffic has remained negative for most of the year, with the holiday season showing even more weakness. The normalized mall traffic numbers for the last two weeks of November showed a year-over-year decline of 3%-4%. December wasn't much better. Traffic was down for the first three weeks of the month, but up slightly in the fourth week. So, the mall retailers likely didn't have the greatest holiday season, including Aeropostale and American Eagle (NYSE:AEO).

However, one of the best underrated mall-retail plays, Urban Outfitters (NASDAQ:URBN), proved resilient despite weak mall traffic. For the holiday season, its sales were up 8% year-over-year and its comps were up 3%. What's more is that for the 11 months ended Dec. 31, 2013 Urban's companywide sales were up 11% year-over-year and its comps were up 7%.

This comes as Urban saw impressive strength in its Free People and Anthropologie brands with their comps up 21% and 11%, respectively. It appears that Urban and The Buckle (NYSE:BKE) have had the most success with their apparel being on-trend in the fashion industry. 

The Buckle trades at 15 times earnings and pays a 1.7% dividend yield. The Buckle also has one of the strongest returns on equity in the business at 40%. However, is The Buckle the best buy in the mall-based retail space? Not exactly. The Buckle's PEG ratio is 2.5; compare that to Urban Outfitters' PEG ratio of 1.25. American Eagle has a PEG ratio of 2.9. 

Why investors should love Urban
Urban also boasts a debt-free balance sheet, which can be rare in the retail space. Unlike some other retailers such as The Buckle, Urban has an international presence. Urban has also steadily opened stores, with between 45 and 60 stores opened each year during the last three fiscal years.

Although Urban doesn't pay a dividend, it is active on the share buy-back side. For fiscal 2012, Urban bought up 20 million of its shares for over $500 million. Worth noting is that top competitor The Buckle does pay a dividend and it has been doing so since 2003. Its current dividend yield is around 1.4%. As mentioned, The Buckle is heavily focused on the U.S., with nearly 450 stores primarily focused on the Midwest. 

American Eagle has taken a keen interest in international markets. It already operates in thirteen countries, and now it's turning its focus to China. American Eagle took over six franchise stores in China. China's citizens have a rapidly rising level of disposable income, and the nation's apparel market is expected to grow from $140 billion in 2012 to $220 billion in 2016. Beyond that, just last year American Eagle opened its first store in Mexico. 

Bottom line
American Eagle appears to be out of fashion. The likes of Urban Outfitters and The Buckle are now resonating with teens and mall shoppers. Urban is priced the best to succeed in the near-term. It's an "on-trend" brand and recent holiday strength suggests that the stock could potentially beat on earnings. Urban has managed to beat EPS expectations in each of the last three quarters. 

Invest in the right growth stocks
They said it couldn't be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.

Marshall Hargrave has no position in any stocks mentioned. The Motley Fool recommends The Buckle and Urban Outfitters. The Motley Fool owns shares of The Buckle. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers