Every investor looks for hints as to what the future might hold. Fortunately, there are several ways to find clues to future results. Of course, these aren't always accurate, but any information that most investors overlook has the potential to be of value. In this case, we'll take a look at the most Googled apparel retailers for 2013.
Most of the names on this list might be expected, such as Nordstrom (JWN 0.75%)Another retailer to make the top five might shock you: J.C. Penney (JCPN.Q). Let's take a look at the five most Googled apparel retailers for 2013 and figure out what it all means from an investing standpoint.
A surprise at No. 1
It's highly unlikely that you expected Kohl's (KSS 0.18%) to be No.1 on this list. I certainly didn't. This isn't a dig at Kohl's. It's a good store that offers broad product diversification and varying price points, which attracts different types of consumers. However, it still caters primarily to the middle-income consumer. Furthermore, it must compete with a multitude of similar retailers, and its revenue declined 0.03% over the past 12 months.
The good news, as well as one reason for the increased searches, relates to expansion. That said, unlike some retailers, Kohl's is being wise by expanding at a methodical pace. It has added 12 stores in 2013, including three in the third quarter. It also remodeled 30 stores , and it plans on remodeling 35 to 50 this year. This, in addition to adding brands like IZOD and Juicy Couture, has likely played a significant role in its Web-search strength.
While these are all positives for Kohl's, I still see it as the epitome of average. There isn't a strong enough catalyst for significant upside potential. Therefore, it's not likely to be the top-performing retailer in the near future.
A bigger surprise at No. 2
J.C. Penney makes the list, but it's not likely for the right reasons. While it's a guarantee that consumers Googled J.C. Penney for shopping purposes, keep in mind also how much drama surrounds the company. Customers or not, people love drama.
The drama began early in the year with Mike Ullman returning to the CEO role, replacing Ron Johnson. Since then, there have been disappointing sales and stock depreciation as well as positive comps surprises. As far as the latter is concerned, keep in mind that the comps bar was set very low last year when Johnson ran the show.
J.C. Penney might be capable of a turnaround, but it would be a risky bet. The company has generated negative operating cash flow of $1.2 billion over the past year, it has $5.6 billion in long-term debt to contend with (versus $1.2 billion in cash and short-term equivalents), and revenue has slid 7.9% over the past 12 months.
The retailer to come in at No. 3 on the list is likely to offer more long-term investment potential.
No surprise at No. 3
I recently wrote an article about retailers that offer excellent return policies, based on GoBankingRates' investigation into the top return policies throughout retail. These companies are catering to consumer demands, which is likely to lead to quality results. Nordstrom found itself on this list.
Nordstrom also finds itself on another positive list. According to Google, searches for apparel at Nordstrom spiked in late October and mid-December. Hmm ... sounds like many gift-givers headed to Nordstrom for the holidays. This, combined with the company's customer-friendly retail policy, is a positive for the long-term investor. And as far as the recent search strength is concerned, while it doesn't guarantee anything, it could mean a solid quarter is around the corner.
No. 4 isn't an option
Forever 21 is a private company. Therefore, you can't invest in it. Even if you could, the likely reason for the heightened searches relates to steep discounts for as much as 50% to 70% off. While this will likely aid the top line, it might crush margins and the bottom line.
No. 5 is a secret
No, I'm not going to hide this information from you. Rather, No. 5 on the list is Victoria's Secret, which is owned by L Brands (BBWI 2.93%). Victoria's Secret's Pink brand has been a key catalyst for Google search strength, and the Victoria's Secret Fashion Week airing live on CBS and online didn't hurt, either. L Brands has seen its top line increase 3.4% over the past year -- not great, but not bad in this consumer environment, either.
Rounding out the top 10 on the Google Trends list are Old Navy (owned by Gap), Macy's, American Eagle (somewhat surprising), Nike, and Dillard's.
The bottom line
Looking at just the Top 5 on the Most Googled Apparel Retailers list, it seems as though Nordstrom offers the most upside potential. Search increases likely relate less to expansion, added brands, drama, or fashion shows than they relate to heightened demand. Therefore, investors might want to consider doing further research on Nordstrom.