It's that time of the month again -- when wild swings are the norm. If the news is good, you can hear Wall Street retail analysts breathe again. But if it's negative, a reality check may be in order.
Just what is this make-or-break news event? At the beginning of the month, apparel retailers begin announcing comparable same-store sales results for the previous month, and with the results in hand, analysts get busy crunching numbers. But for the sake of being Foolish (and not foolish), let's focus in on just three of the hot youth-oriented retailers in the market: Buckle (NYSE:BKE), Hot Topic (NASDAQ:HOTT), and Pacific Sunwear (NASDAQ:PSUN).
We looked at PacSun a few weeks ago -- and this little surf 'n' sun retailer has been supercharged. Comps in its third quarter grew by 4.6%, compared with the same period a year ago, which helped increase its top line by a double-digit pace. In the month of November, however, PacSun's sales seemed to chill out a bit, as comps were up only 3%. Analysts were expecting the retailer to increase this metric 5.2%.
The company saw the greatest growth from its d.e.m.o. chain, with comps growth of 4.9%. But PacSun operates only 198 d.e.m.o. stores versus 807 PacSun units, which managed a 2.7% increase in comps. These latest sales results aren't all that impressive, given the radical performance we witnessed a short while ago.
It was Black Friday in more ways than one for Goth-retailer Hot Topic, which posted flat comparable same-store sales for the month of November. But this appears to be welcome news on the Street; analysts were actually anticipating another round of negative news in light of the dark days in the company's third quarter. Hot Topic's leadership attributed the improvement in part to Halloween. If you've ever set foot in a Hot Topic store, you'll know why this reasoning makes perfect sense -- the stores have enough spooky merchandise to make Marilyn Manson proud.
And then there's Buckle. It was looking a little tarnished in the third quarter, and its November sales did little to buff up a shine. Net sales rose just 5.6% to $40.3 million, while comps were barely positive, up a meager 0.3%. The good news for shareholders is that the company bought back more than 53,000, or 0.3%, of its outstanding shares during the month at an average price of $34.03. In recent trading its stock is going for just under $33. The buyback program, a dividend yield of just more than 2%, and a stock trading at a trailing P/E of approximately 14 (less than the P/Es of the other two companies), are all reasons to consider getting some skin in this game.
All told, these youth-oriented retailers, as rockin' as their clothes may be, are in a bit of a funk. PacSun's November glitch may be an anomaly, so this one bears watching further to see whether a negative trend is beginning to develop. Buckle has been in a rut for a little longer, but investors should keep watching to see whether its sales start to improve at a faster clip.
Hot Topic, however, is simply just stuck in a ditch. Investors looking to get a piece of the grunge market should probably avoid that company for now and focus their attention on the other two.
More groovy youth-oriented retailers to consider:
- Urban Outfitters (NASDAQ:URBN) has been looking like a Rule Breaker.
- Aeropostale (NYSE:ARO) is like sonot cool right now.
- Abercrombie & Fitch (NYSE:ANF) is causing fits for investors who sold too soon.
Interested in companies that have retained their intrinsic value. even though they're trading at bargain-basement prices? Take a free trial of our Motley Fool Inside Value service, where you'll find the current and past picks of lead analyst Philip Durell, as well as a community of value investors eager to exchange opinions.
Fools, now is the time to open your hearts and wallets to worthy causes! Please support our five Foolish charities at www.foolanthropy.com .
Fool contributor Jeremy MacNealy does not own shares of any companies mentioned.
