It has been a very rough stretch for many retail names as of
late, as the sector has definitely fallen out of favor with many
investors. Trends in the space are apparently shifting, and a
number of companies are being left in the dust.
While this is best exemplified by recent poor trading in
Abercrombie and Fitch (
, another sluggish performer that is probably worth avoiding in the
Chico's FAS (
. This company has held up in a much tighter range as of late, but
much like the others on the list, the bottom could be about to fall
out for this retailer.
Chico's in Focus
The main concern for Chico's has to be the declining level of
growth for the firm. The past five years saw 17.9% in earnings
growth, while the next five years are expected to see 15.3%. While
this is admittedly still a strong level, it is very concerning how
bearish analysts have been on the company as of late, suggesting
that opinion is starting to turn on Chico's.
In the past 30 days, 11 estimates have gone down for the current
quarter, while just one has gone up. Meanwhile for the current year
period, 12 estimates have gone down in the past 30 days, while the
consensus has fallen from $1.15/share to just $1.06/share right
You can't really blame analysts for their newfound bearishness
either, especially after the most recent quarter's earnings report.
Comparable-store sales fell 2.6%, while SG&A expenses rose by
3.7%, leading to a bit of a margin squeeze for Chico's for the most
recent quarter. And with the broad trends hitting a number of
retail names, the path lower was clearly the one of least
resistance for this troubled company.
So while Chico's may have a different focus than ARO and ANF-as
Chico's generally zeroes in on women over 30 for many of its
brands-it is facing the same trends as it is falling out of favor
with its key target market. For this reason, analysts are very
bearish on the company heading into the key holiday season,
suggesting that this might be a company to stay away from until it
can turn things around.
For this reason, we currently have a Zacks Rank #5 (Strong Sell) on
this stock, meaning that we are looking for underperformance for
this company in the short to medium term. Furthermore, thanks to
some of the broader retail trends highlighted above,
the industry also has a low rank
(204 out of 260), so the trend is clearly lower in the space.
Yet while the trend might not be great in the sector, there are
still a few names in the retail segment that are well-positioned.
In fact, there are several companies that have earned themselves a
Zacks Rank of 2, meaning that they could be 'buys' despite the
sluggish overall environment in the space.
Some of the interesting choices in this space include Ann Inc (
), DSW Inc (
), and L Brands (
). All three of these have also just surged to a buy rank from a
hold within the last week, suggesting that now could be the time to
look at these companies instead of the out-of-favor Chico's at this
Want the latest recommendations from Zacks Investment Research?
Today, you can download
7 Best Stocks for the Next 30 Days
Click to get this free report >>
ABERCROMBIE (ANF): Free Stock Analysis Report
ANN INC (ANN): Free Stock Analysis Report
AEROPOSTALE INC (ARO): Free Stock Analysis
CHICOS FAS INC (CHS): Free Stock Analysis
DSW INC CL-A (DSW): Free Stock Analysis Report
L BRANDS INC (LTD): Free Stock Analysis Report
To read this article on Zacks.com click here.