Of the teenage clothing retailers, the top ones are Aeropostale, American Eagle Outfitters, Abercrombie and Fitch (which owns Hollister and Ruehl), and Express. Aeropostale has cheaper clothes of lesser quality; American Eagle has decent quality clothing; Hollister has better clothes than American Eagle for a slightly higher price, and Abercrombie and Fitch has very high quality clothing for very high prices. All of these retail stores target teens. Ruehl is Abercrombie's retailer targeted more so at college students. Express has designer clothes for teens and people in the 20s.
So what do I like so much about Express? First, let me give you my observations of these retailers and their customers. Generally, people will go to aeropostale if they are looking to save a buck. I have bought some clothes from Aeropostale and I can say I am disappointed. Everything I ever get from Aeropostale is either not fitted (which is a big thing teenagers look for) or tears along the edges. I see many people undergo this same problem, but ignore it as the price is very low. American Eagle has a mix of clothes for differently built customers and puts a reasonable price on all of their clothes. Many people will shop here if they do not have the jock sort of build that best suits the clothes from Abercrombie and its subsidiaries. The clothes are also reasonably priced and AEO does have many coupons throughout the year. Abercrombie and Fitch reigns superior to both of these retailers. They have very nice clothes for very high prices; but the customers keep coming back, regardless of the price. Customers are willing to pay $30 for a polo or $70 for jeans because of the great quality and reputation of Abercrombie. However, ANF has a very high priced stock, with a P/E of over 40. This is because of the expected return of customers and recovery from 2008. However I have noticed one key thing about Abercrombie that makes me very frightened of its stock price. Abercrombie has started to give out coupons almost monthly, for Hollister, Abercrombie and Fitch, and Ruehl. That doesn't seem so bad; however, Abercrombie used to issue coupons once a year, and maybe have a big winter sale; but that's it. They still had customers paying those high prices happily. Now, sales are not as high as desired and Abercrombie is losing its customers to the competition.
What makes Express superior? Well Express has blowout sales and during these sales people go crazy - and I don't mean the "Oooh, the price is so low!" kind of crazy. I mean the totally out-of-mind, "I need to go to Express, they have a great sale!" kind of crazy. Once Express announces one of their big sales, they will get sales and cash registers will be opening and closing like crazy. Through these phenomenal sales, Express is building its customer base. Express has designer clothing at prices like ANF's; but with their overly-hyped sales, customers will come in, make purchases, and revisit for future purchases.
I see much more growth in Express than in Abercrombie, or any of the other teenage clothing retail giants. Express is stealing Abercrombie's customers. Now let's look at some numbers (finally, the numbers!). Express's stock is quite reasonably priced at $18, placing their P/E at 14.5. Their gross profit has had a substantial increase from $454M in 2008 to $545M in 2010. Express has recovered from the net loss of $30M in 2009 to a net income of $75M in 2010 and the net change in cash is $58M for 2010 as opposed to the $143M loss in 2009. Quite positive looking numbers, to say the least.
Buy Express at $17.25.
ANF - SELL SELL SELL
EXPR - BUY BUY BUY
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