Investors seem to be taking a dour approach to many retailers lately. But one retailer, which targets 'tween girls, ages 7 to 14, has bucked the trend by providing some upbeat news. Too (NYSE:TOO) raised its profit forecast today, leading to a good deal of optimism from investors.
It seems that Too, which used to be owned by LimitedBrands (NYSE:LTD), finds the 'tween market quite lucrative. Too management says it now expects $0.41 to $0.43 per share in profit in the third quarter -- up from the previously anticipated $0.39 per share.
Back-to-school sales were even better than expected. If you take a look back at the second quarter, you'll see that Too reported back-to-school sales were doing well. (At that time, the company also reported a nice 150% increase in quarterly profit.)
Although many companies -- including retailers -- have blamed the hurricanes for poor performance, Too says the disasters did little harm to its sales, since it only has five stores that are still closed.
My Foolish colleague Seth Jayson has advised Fools rather recently to ignore the retail doomsayers. Along with powerhouse stocks like Chico's (NYSE:CHS), it makes sense that investors might want to keep their eyes on companies like Too, which have been known to weather many a storm because they had a great concept or focused on a unique demographic.
However, shares of Too increased 5% in today's trading, and the stock already has a P/E ratio of 22, which is currently higher than that of a few other teen-oriented retailers, such as Aeropostale (NYSE:ARO) and American Eagle Outfitters (NASDAQ:AEOS). Shares of Too have also enjoyed the benefits of an optimistic investor outlook overall this year, as you can see from this chart.
Too might be fast becoming one of the pricier bets in a lucrative retail niche.
Alyce Lomax does not own shares of any of the companies mentioned.
