This week’s New York Times Style section brought a story about how fashion trends relate to the economic climate. A similar story was published in 2008 when all was going to hell in a handbasket, announcing that longer hemlines were in for the duration of the recession.
This latest article said quite the opposite. Apparently, colorful prints are the new black. As more positive economic indicators come in each week and the stock market continues its march higher, women are tossing aside their drab clothing in favor of bright colors. (Just a thought, but the changing of the seasons from winter to spring might also have something to do with this … )
According to the Times, these hotter hues–prints especially–signal a recovery … for the fashion world at least. One woman interviewed in the article was quoted as saying, “People are sick of not shopping.”
And that may be true. Last week, I wrote about increasing retail sales and a booming retail stock, Lululemon Atheletica (LULU), which hit another new high this week. As the recession fades, it seems that consumers, women especially, are pulling out their wallets for new duds.
Lululemon isn’t the only retail stock that’s been featured in Cabot Top Ten Report recently. Editor Michael Cintolo also featured the fine clothing retailer Ann Taylor (ANN) in early February. Here’s what he had to say then:
“No one will argue that AnnTaylor Stores is a gangbuster of a company, but right now it’s following a familiar path for successful retailers during the recession–shake up its product mix, manage sales promotions and clamp down on inventory. That doesn’t sound exciting, but the results are beginning to show. Last week, management said that sales for the quarter ending in January were about $470 million and that earnings would be substantially higher than a year ago. That led analysts to significantly bump up their estimates for the next few quarters (they now see 2010 earnings per share of 66 cents, up from an estimate of 34 cents three months ago), although it’s fair to note that business in general is still struggling, with sales expected to be flat this year. It’s not a good growth story, but AnnTaylor is a turnaround with some potential.
“ANN nearly went bust during the bear market, but it enjoyed a heady run up before settling into a new basing structure last fall. That structure looks like a double bottom (think of the letter W), with the second low undercutting the first low, shaking out the weak holders. Then, last week, ANN surged on huge volume on management’s earnings news, setting up a breakout in the days or weeks to come. In total, we think you could buy a little here, and then possibly buy more if (but only if!) you see a powerful breakout above 16.3. A meaningful drop below 14 would be bearish.”
And the stock has broken out since Mike wrote that! In fact, Cabot Top Ten Report subscribers are up nearly 60% from the original buy range. It looks like retail stocks have more room to grow, so if you haven’t gotten in on any stocks in this sector, there’s still time.
And the best place to find out which stocks will continue to ride this wave higher is Cabot Top Ten Report. Subscribers are enjoying profits of over 30% in LULU and there’s more to come. Don’t miss the next issue that comes out on Monday. Click here to learn more.