These clothing stocks are clearing inventory as jean makers struggle

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By Mary-Lynn Cesar for Kapitall.

Jean sales are down. According to a recent  Fortune article , shifting sartorial tastes have led women to ditch denim for leggings (and jeggings) and pushed men towards chinos. Three major clothing companies have reported a drop in American jeans revenue this month:  Guess Jeans ( GES ) , Levi Strauss, and  VF Corp ( VFC ) , which manufactures Lee and Wrangler jeans. 

VF's jean sales in the Americas fell 7%, Guess Jeans saw a 4.2% decline in North American sales, and Levi Strauss's sales in the Americas dropped 3.2%  thanks to lower wholesale women's sales. But not every jean maker was affected by waning interest in jeans: Premium denim company  Joe's Jeans ( JOEZ )  reported a 56% increase in second-quarter revenue, raking in $48.2 million. 

The difficulty some companies are encountering in selling their jeans inspired us to take a look at inventory trends across the apparel industry for our following screen. We began by creating a universe of US-based clothing stocks, selecting companies belonging to the Apparel Store and Textile - Apparel Clothing industries.

Next, we screened that group for stocks with encouraging inventory trends, meaning that quarterly revenue grew faster than quarterly inventory over the past year and inventory is decreasing as a percentage of the company's current assets . Inventory is the portion of goods a company has yet to sell, so revenue growth outpacing inventory growth indicates that the company is more than able to sell its products. 

We were left with three clothing stocks on our list. Do you think their encouraging sales trends will continue? Use this list as a starting point for your own analysis, and let us know what you think in the comments.

Click on the interactive chart to view data over time. 

1. Columbia Sportswear Company ( COLM , Earnings , Analysts , Financials ): Engages in the design, development, sourcing, marketing, and distribution of outdoor apparel, footwear, accessories, and equipment in the United States, Latin America, the Asia Pacific, Europe, the Middle East, Africa, and Canada. Market cap at $2.81B, most recent closing price at $80.65.

Revenue grew by 21.75% during the most recent quarter ($424.08M vs. $348.31M y/y). Inventory grew by -10.77% during the same time period ($290.2M vs. $325.24M y/y). Inventory, as a percentage of current assets, decreased from 31.62% to 24.34% during the most recent quarter (comparing 3 months ending 2014-03-31 to 3 months ending 2013-03-31).

The company's first-quarter revenue grew by 21.44% from a year earlier to a record $424.1 million. During the same period, year-over-year revenue growth for the Textiles, Apparel, & Luxury Goods industry was 12.85%. 

On a trailing twelve month basis, Columbia's revenue grew by 4.42% vs. an industry average of 13.48%.

Over the last five years, the company's revenue has grown by 5.11% vs. an industry average of 12.02%.

2. Hanesbrands Inc. ( HBI , Earnings , Analysts , Financials ): Engages in the design, manufacture, sourcing, and sale of apparel essentials in the United States and internationally. Market cap at $9.69B, most recent closing price at $97.28.

Revenue grew by 12.05% during the most recent quarter ($1,059.37M vs. $945.46M y/y). Inventory grew by 4.09% during the same time period ($1,402.12M vs. $1,346.98M y/y). Inventory, as a percentage of current assets, decreased from 61.29% to 57.44% during the most recent quarter (comparing 13 weeks ending 2014-03-29 to 13 weeks ending 2013-03-30).

The company's first-quarter revenue grew by 12.05% from a year earlier to $1.06 billion. During the same period, year-over-year revenue growth for the Textiles, Apparel, & Luxury Goods industry was 12.85%. 

On a trailing twelve month basis, Hanes revenue grew by 5.42% vs. an industry average of 13.48%.

Over the last five years, the company's revenue has grown by 1.72% vs. an industry average of 12.02%.


3. Pacific Sunwear of California Inc. ( PSUN , Earnings , Analysts , Financials ): Operates as a retailer rooted in the action sports, fashion, and music influences of the California lifestyle. Market cap at $149.49M, most recent closing price at $2.17.

Revenue grew by 2.88% during the most recent quarter ($171.14M vs. $166.35M y/y). Inventory grew by -7.53% during the same time period ($95.86M vs. $103.67M y/y). Inventory, as a percentage of current assets, decreased from 74.47% to 70.59% during the most recent quarter (comparing 13 weeks ending 2014-05-03 to 13 weeks ending 2013-05-04).

The company's first-quarter revenue grew by 2.88% from a year earlier to $171.1 million. During the same period, year-over-year revenue growth for the Specialty Realty industry was 6.73%. 

On a trailing twelve month basis, Pacific Sunwear's revenue declined by 0.57% vs. an industry average of 6.07%.

Over the last five years, the company's revenue declined by 8.66% vs. an industry average of 5.47%.

(List compiled by Mary-Lynn Cesar. Accounting data sourced from Google Finance. Revenue growth data sourced from Fidelity. All other data sourced from finviz.)

Kapitall Wire is a division of New Kapitall Holdings, LLC. Kapitall Generation, LLC is a wholly owned subsidiary of New Kapitall Holdings, LLC. Kapitall Wire offers free investing ideas, intended for educational information purposes only. It should not be construed as an offer to buy or sell securities, or any other product or service provided by New Kapitall Holdings, LLC, and its affiliate companies.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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