Serious money can be made in retail. Witness: Chico's
Serious money can also be lost in retail. Chico's is down more than 50% since March, and the formerly high-flying Gap
Why is retail so volatile? Because success depends on so much more than just balance sheets, cash flow, and projected growth rates. There's this squishy, subjective thing called "style" that can be difficult for investors to grasp. After all, like Peter Lynch, I got married simply to get the inside scoop on fashion trends. (Just kidding, honey.)
Unfortunately, we don't all have an army of wives or a gaggle of teeny-boppers helping us differentiate between what's hot and what's not. Until now.
Please, tell me more
Allow me to introduce Motley Fool CAPS, a community intelligence database (still in beta testing) in which investors pool their expertise in order to discover the best stocks on the market. Within the retail sector, CAPS has already bubbled up a number of four- and five-star stock ideas, including Zumiez
The power of CAPS may be most evident, however, in the analysis of Urban Outfitters
- Their stores are always packed . They stay relevant in the fashion world by shaking up their mix frequently.
- My kids still like to spend money there.
- Hands down my favorite retailer.
- Ready to retake its place in the retailing elite.
Now contrast that with what folks are saying about Gap:
- I don't think Gap is ever coming back.
- Gap has had some trouble figuring out who they are.
- Gap still doesn't get it . They've had serious issues since their main designer left.
- Gap is the worst retailer I know.
- [The] Gap brand has lost its image, especially among young folks.
In a word: Eeesh.
The Foolish bottom line
While Urban Outfitters has certainly had its difficulties recently, if it's half as fashionable as CAPS investors seem to think it is, then this company should be able to rebound in a way that Gap has failed to -- and earn investors great returns along the way.
That's the power of putting an army of shoppers to work in your research, and it's an opportunity that's only available through Motley Fool CAPS. If you'd like to take a look at CAPS and add your ratings and research, just click here. The service is a revolutionary research tool that's entirely free of charge.
Tim Hanson does not own shares of any company mentioned in this article. Gap is both a Stock Advisor and Inside Value recommendation. American Eagle is a Stock Advisor recommendation. Zumiez is a Hidden Gems pick. The Fool's disclosure policy assures you that no stocks were harmed in the writing of this article.