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Rick Pendergraft's Avatar
published in Blogs
Nov 20, 2020

Apparel Retailers Head in to Earnings Riding Huge Gains

One of the hardest hit industries in the past year has been retail apparel. Many of the companies that base their stores in the traditional enclosed shopping malls were already struggling even before the global health crisis hit. With malls closed or operating with limited hours, many of the apparel retailers were hit particularly hard.

Over the last four months the stocks of these companies have pretty strong bounces as investors believed the selling was overdone. Three companies in particular that have seen huge rallies in recent months will also be reporting earnings next week. Abercrombie & Fitch (ANF), American Eagle Outfitters (AEO), and Gap (GPS) are all set to report earnings on November 24.

If we look at the stocks of these companies over the last four months, we see some incredible gains. From July 20 through November 19, Abercrombie & Fitch gained 118.2%, Gap rallied 96.6%, and American Eagle jumped 70.6%. During that same time period the S&P 500 only gained 10.2%.

While Abercrombie was the leading performer of the three, the daily chart of Gap really caught my eye because of how organized and consistent the rally has been. We see a very well formed trend channel that defines the cycles within the overall upward trend.

As impressive as the rallies have been, I have my concerns about whether these companies can warrant such huge moves in their stock. In the last round of quarterly earnings reports we saw all three post revenue declines with Abercrombie seeing its revenue drop 17%, American Eagle’s dropped 15%, and Gap saw its sales drop 18%.

That isn’t exactly the recipe for success and all three companies have rather small profit margins. This means that the companies need to sell more and more product in order to bring their earnings up.

If we look at Tickeron’s fundamental analysis screener, all three companies rank poorly in the Profit vs. Risk rating—that rating is not based on the profits of the company, but rather the potential profit for investors versus the risk associated with buying it. The SMR ratings for Gap and American Eagle are both very poor and that rating includes the sales growth and profit margin figures mentioned above. One area where the stocks seem to do well was in the Valuation Rating. Both Gap and Abercrombie are rated above average in this category while American Eagle is average.

All three companies are expected to see big declines in their third quarter earnings results compared to Q3 2019. Abercrombie is expected to lose money in the quarter while Gap and American Eagle are expected to remain profitable, but see earnings decline by over 30% each. All three companies are expected to post huge declines in earnings for 2020 with big rebounds expected in 2021.

The overall comparison from Tickeron lays out how the companies compare to one another and how they measure up against other companies in general.

Related Ticker: GPS

GPS's Stochastic Oscillator stays in overbought zone for 14 days

The longer the ticker stays in the overbought zone, the sooner a price pull-back is expected.

Price Prediction Chart

Technical Analysis (Indicators)

Bearish Trend Analysis

The RSI Indicator demonstrates that the ticker has stayed in the overbought zone for 13 days. The longer the ticker stays in the overbought zone, the sooner a price pull-back is expected.

Following a 3-day decline, the stock is projected to fall further. Considering past instances where GPS declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .

GPS broke above its upper Bollinger Band on March 21, 2024. This could be a sign that the stock is set to drop as the stock moves back below the upper band and toward the middle band. You may want to consider selling the stock or exploring put options.

Bullish Trend Analysis

The Momentum Indicator moved above the 0 level on March 07, 2024. You may want to consider a long position or call options on GPS as a result. In of 84 past instances where the momentum indicator moved above 0, the stock continued to climb. The odds of a continued upward trend are .

The Moving Average Convergence Divergence (MACD) for GPS just turned positive on March 08, 2024. Looking at past instances where GPS's MACD turned positive, the stock continued to rise in of 51 cases over the following month. The odds of a continued upward trend are .

GPS moved above its 50-day moving average on March 08, 2024 date and that indicates a change from a downward trend to an upward trend.

The 10-day moving average for GPS crossed bullishly above the 50-day moving average on March 12, 2024. This indicates that the trend has shifted higher and could be considered a buy signal. In of 15 past instances when the 10-day crossed above the 50-day, the stock continued to move higher over the following month. The odds of a continued upward trend are .

Following a +1 3-day Advance, the price is estimated to grow further. Considering data from situations where GPS advanced for three days, in of 297 cases, the price rose further within the following month. The odds of a continued upward trend are .

The Aroon Indicator entered an Uptrend today. In of 237 cases where GPS Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are .

Fundamental Analysis (Ratings)

Fear & Greed

The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is slightly undervalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: P/B Ratio (3.922) is normal, around the industry mean (3.890). P/E Ratio (20.336) is within average values for comparable stocks, (101.361). Projected Growth (PEG Ratio) (1.003) is also within normal values, averaging (1.444). Dividend Yield (0.022) settles around the average of (0.030) among similar stocks. P/S Ratio (0.688) is also within normal values, averaging (2.069).

The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating steady price growth. GPS’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.

The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.

The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating that the returns do not compensate for the risks. GPS’s unstable profits reported over time resulted in significant Drawdowns within these last five years. A stable profit reduces stock drawdown and volatility. The average Profit vs. Risk Rating rating for the industry is 73, placing this stock better than average.

The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to worse than average earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.

Notable companies

The most notable companies in this group are TJX Companies (NYSE:TJX), lululemon athletica (NASDAQ:LULU), Gap (The) (NYSE:GPS), Abercrombie & Fitch Co (NYSE:ANF), Foot Locker (NYSE:FL), Guess (NYSE:GES), Stitch Fix (NASDAQ:SFIX).

Industry description

Companies in the apparel and/or footwear retail industry sell clothing, accessories and footwear, for different age groups and genders. The industry’s product categories could range from basics, such as underwear, to luxury items. Some retailers source items from wholesalers or an apparel brand to sell in their stores; some others are licensed to make and market their own retail goods under particular brands. Several companies outsource production of clothing to developing/emerging economies where labor costs are relatively inexpensive. Apparel retail is often influenced by fashion trends, and many companies feel the need to adapt to what’s “in vogue” to retain customers and attract new ones. A major disruption in this industry has been the burgeoning trend in digital shopping – to compete with rapidly growing e-commerce, even traditional retail players are upping the ante on their online platforms. Much of the products’ performance in apparel/footwear retail is cyclical, i.e., economic boom times encourage consumer spending, while recessions induce thriftiness among people. Some large-cap U.S. apparel/footwear retail companies include TJX Companies Inc., Ross Stores, Inc., Lululemon Athletica Inc. and Burlington Stores, Inc.

Market Cap

The average market capitalization across the Apparel/Footwear Retail Industry is 12.38B. The market cap for tickers in the group ranges from 256K to 119.4B. IDEXY holds the highest valuation in this group at 119.4B. The lowest valued company is DESTQ at 256K.

High and low price notable news

The average weekly price growth across all stocks in the Apparel/Footwear Retail Industry was 2%. For the same Industry, the average monthly price growth was -4%, and the average quarterly price growth was 14%. JDSPY experienced the highest price growth at 26%, while ESHDF experienced the biggest fall at -72%.

Volume

The average weekly volume growth across all stocks in the Apparel/Footwear Retail Industry was -27%. For the same stocks of the Industry, the average monthly volume growth was 12% and the average quarterly volume growth was 9%

Fundamental Analysis Ratings

The average fundamental analysis ratings, where 1 is best and 100 is worst, are as follows

Valuation Rating: 52
P/E Growth Rating: 45
Price Growth Rating: 53
SMR Rating: 62
Profit Risk Rating: 73
Seasonality Score: 0 (-100 ... +100)
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GPSDaily Signal changed days agoGain/Loss if shorted
 
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General Information

an operator of stores that retail clothing, accessories and personal care products

Industry ApparelFootwearRetail

Profile
Fundamentals
Details
Industry
Apparel Or Footwear Retail
Address
Two Folsom Street
Phone
+1 415 427-0100
Employees
85000
Web
https://www.gapinc.com
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