As we head into Black Friday and the holiday shopping season, small cap apparel retail stocks Cache, Inc (NASDAQ: CACH), Stein Mart, Inc (NASDAQ: SMRT), Pacific Sunwear of California, Inc (NASDAQ: PSUN) and Destination XL Group Inc (NASDAQ: DXLG) have the distinction of being the best performing small cap apparel retail stocks for this year (according to Finviz.com) with gains of 111.6%, 92.7%, 88.7% and 65.7%, respectively. What are these high flying small caps doing right in the apparel retail space and will they continue delivering a stellar performance for Black Friday and the all important holiday season for investors? Here is what new and existing investors and traders alike need to know or consider:
Cache, Inc. A nationwide, mall-based specialty retailer of lifestyle sportswear and dresses targeting style-conscious women, Cache, Inc has approximately 250 centrally located stores in 41 states, Puerto Rico and the U.S. Virgin Islands located in high-traffic, upscale malls. In mid-November, Cache, Inc reported a 3.1% net sales increase to $47.2 million, a 6% comparable store sales increase, a 150 basis point gross profit margin expansion to 33.5% (primarily due to lower design, production and sourcing costs plus a decrease in markdowns and higher sales) and an adjusted net loss of $7.4 million verses an adjusted net loss of $4.9 million. Cache, Inc's Chairman expressed confidence in the upcoming holiday season and that the company's overarching goal remains to maximize their white space opportunity which has been defined as "the events in a woman's life." On Tuesday, small cap Cache, Inc fell 2.66% to $5.12 (CACH has a 52 week trading range of $2.00 to $6.83 a share) for a market cap of $110.90 million plus the stock is up 111.6% since the start of the year and up 162.6% over the past five years.
Stein Mart, Inc. Founded by the current chairman's grandfather just after the turn of the 20th century, Stein Mart is a nationwide network of 264 easy-to-access freestanding stores selling merchandise that includes current-season, brand name fashion for women and men; accessories; home decor; linens; and shoes at prices up to 60% below department store prices. Last Thursday, investors were profit taking after Stein Mart reported good earnings as the stock fell around 10%. Specifically, Stein Mart reported a 6.1% revenue increase to $290.5 million, a 4.8% comparable store sales increase, a gross margin of 26.8% of sales verses 25.8% (due to higher markup and slightly lower occupancy costs as a percentage of sales, offset by slightly higher markdowns) and net income of $28,000 verses a net loss of $1.7 million. What may have triggered some investors to take profits was Stein Mart'a less than rosy guidance of a gross profit rate being 100 basis points lower than last year's fourth quarter due to more normal markdown levels compared to last year's fourth quarter (when sales exceeded planned merchandise levels), the positive impact of the 53rd week in 2012, increasing e-commerce sales (which have lower margins due to fulfillment costs) and a greater penetration of sales from the home division (which has lower margins). On Tuesday, small cap Stein Mart fell 1.42% to $14.53 (SMRT has a 52 week trading range of $6.84 to $16.17 a share) for a market cap of $646.60 million plus the stock is up 92.7% since the start of the year and up 1,141.9% over the past five years.
Pacific Sunwear of California, Inc. With around 638 stores in all 50 states and Puerto Rico, Pacific Sunwear of California strives to "embrace and deliver all aspects of the California lifestyle" to its customers. Specifically, the company sells a combination of branded and proprietary casual apparel, accessories and footwear designed to appeal to teens and young adults. Pacific Sunwear of California is scheduled to next report earnings after the market closes on Thursday, December 5 and it should be noted that last August, shares sank some 20% on weaker than expected Q3 guidance. Nevertheless, DA Davidson sounded a note of optimism by saying that Pacific Sunwear can still become profitable in 2014 as they think the company's women's apparel is building momentum plus they believe stores are attracting a significant number of teens again. A CNBC segment that followed several teenagers on their back to school clothing shopping spree seemed to confirm that Pacific Sunwear of California has the attention of at least some teens, but investors might want to wait for the coming earnings report in case there are any positive or negative surprises. On Tuesday, small cap Pacific Sunwear of California rose 0.33% to $3 (PSUN has a 52 week trading range of $1.36 to $4.59 a share) for a market cap of $205.70 million plus the stock is up 88.7% since the start of the year and up 183% over the past five years, but the most recent technical chart is not looking very bullish.
Destination XL Group Inc. The largest multi-channel specialty retailer of big & tall men's apparel with operations throughout the US, Canada and in London, Destination XL Group operates Destination XL®, Casual Male XL®, Casual Male XL Outlets, Rochester Clothing, B&T Factory Direct™, Shoes XL and Living XL® plus several catalogs and e-commerce sites (including www.destinationxl.com). Destination XL Group's stores offer an upscale environment with more than 2,000 private label and name-brand styles to choose from. Last Friday, shares of Destination XL Group jumped more than 10% after the company beat earnings expectations. Specifically, fiscal second quarter sales came in at $88.2 million verses $88.7 million while combined comparable sales increased 17.7% and comparable sales increased 11.3% for the 36 DXL stores open longer than one year as customers spent 17.4% more in their average store transaction (Note: DXLG opened 9 DXL stores and closed 22 Casual Male XL stores plus eliminated its catalogs completely in the second quarter as part of its shift towards a more profitable e-commerce business). Destination XL Group's net loss came in at $4.1 million verses $1.6 million due to $5.8 million in DXL transition and marketing costs included in the third quarter. On Tuesday, small cap Destination XL Group fell 2.25% to $6.96 (DXLG has a 52 week trading range of $3.42 to $7.30 a share) for a market cap of $354.48 million plus the stock is up 65.7% since the start of the year and up 1,481.8% over the past five years.
Finally, here is a look at the longer term performance of all four small cap apparel retail stocks:
As you can see from the above chart, the four best performing apparel retail stocks for this year have had a relatively flat performance since the end of the financial crisis. This means that new investors might want to be cautious before doing any pre or post Black Friday portfolio shopping for one of this year's high flying small cap apparel retail stocks.
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