Living Luxe and Large
AnnaLisa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Mad Men’s Christina Hendricks (she plays the ad agency’s Rubenesque, redhaired office manager) bristles at the term “full-figured.” Queen Latifah thinks "plus-size" is a dirty word. So should I use the term “big and beautiful” or “voluptuous” to describe these three stocks that offer voluptuous ladies fashionable garments? Queen Latifah favors the term curvaceous.
Ascena Retail Group (NASDAQ: ASNA), HotTopic, and HSN (NASDAQ: HSNI) are three companies offering fashion statements for the fastest growing sector of fashion, call it voluptuousness, sizes 12 and larger, comprising 16% of US fashion retail.
You may think of HotTopic (NASDAQ: HOTT) as the teen trend retailer with 628 Hot Topic stores but it also owns Torrid, a line of 148 stores catering to the curvaceous. Home Shopping Network just debuted Queen Latifah’s line of fashions, The Queen Collection, on August 27. She stated in an interview she will also design luxe accessories. Look out, Michael Kors! And Ascena after purchasing Charming Shoppes in 2011 has Lane Bryant and Catherines for the curvy lady.
Which is the hottest name?
Hot Topic is interesting with its 3.50% yield (a payout ratio of 88%) and 26.59 P/E with a forward P/E of 18.72. While it’s off from its midsummer high of $10.73 it’s up almost 50% from its January 4 low of $6.44. As a teen and tween retailer it has a lot of competitors from Abercrombie & Fitch, delia’s, Wet Seal, Forever 21 and even Ascena Retail with its Justice stores. Hot Topic’s P/E is larger than the industry average at 17.45 but less than Abercrombie & Fitch at 31.40. You can’t really compare the two as Hot Topic is not the hip prepster look that Abercrombie promotes.
Becker Drapkin Management LP and the T. Rowe Price Small Cap Stock Fund are the largest institutional and mutual fund holders, with stakes of 8.30% and 4.75% respectively. The company is 34 years old and headquartered in City of Industry, CA. (what a great town for a corporate HQ!). It operates in the US, Canada and Puerto Rico but has ecommerce sites as well. Hot Topic is the small cap name in this bunch with a market cap of $394.70 million.
HSN you probably know better as the Home Shopping Network. It has a $2.72 billion market cap and a P/E of 22.93. It also has a small yield of 1.00%. It calls itself an interactive multi-channel retailer, on TV, online, catalogs, and bricks and mortar retail and outlet stores. The stock is up 36.68% over the last year. It also operates a second division called Cornerstone, that features higher-end home furnishings including Frontgate and Ballard Designs.
Its return on assets is 12.29%, but the quarterly revenue growth of 6.40% is offset by quarterly earnings growth of -3.80%, year over year. It has a 2.0 debt/cash ratio, which is more than Fools like. Goldman Sachs seems to like the name as it’s the largest institutional holder with a 5.12% stake. Ceo Mindy Grossman holds 137,689 shares herself.
The company is reporting on Halloween, October 31. HSN has been courting some famous names besides Queen Latifah, including Carol Brodie, purveyor of fine jewelry, and now the style arbiter will be selling home décor and fashion accessories. Guiliana Rancic, so-called “America’s Sweetheart” is selling a fashion collection called G by Guiliana Rancic. If you don’t know who she is you’re not alone, apparently, she’s a reality TV star and entertainment journalist.
On September 14 Piper Jaffray raised their price target on HSNI by 20% to $64.00. This was already after August 1 Q2 results that beat again after 3 straight years of beats averaging double digits.
Ascena has been on an ascent itself, up 51.26% over the last year. It is the largest of these three names and also owns maurice's stores as well as dressbarn and the aforementioned Catherine's and Lane Bryant for lush figured ladies and the Justice stores for teens for a total of 3828 stores in the US, Canada, and Puerto Rico. International customers can order on their web sites.
Ascena has a 3.24 billion market cap and a 20.66 P/E. It has the most well known name for size 12 and over fashions for women, Lane Bryant. The company is reporting again on November 26. But for the latest news the company is holding an Investor Day and webcast on October 18. They may even pre-announce some good numbers so if you're interested you should check it out.
The company now has some $326 million in debt mainly due to their purchase of Charming Shoppes in 2011 but all the comps reported at their last ER in September showed strong same store sales at the new stores they brought into the fold. Revenue for the last twelve months was $3.35 billion and at the last earnings release guided for revenue close to $5 billion in 2013.
Chairman and co-founder Elliot Jaffe owns 1,049,114 shares ; CEO David Jaffe owns 10,130,618 shares, and another member of the Jaffe family, Elise, owns 9,771,983 shares. That's a lot of insider conviction in the stock.
Kohl's, J.C Penney, and Aerospostale are listed as direct competitors to Ascena. But with its differentiated boutique stores and niche fashion brands there really isn't one retailer that could stand an apple to apple comparison with Ascena. While, personally, I think of dressbarn clothes as "Mommish" (a term my kids made up when we went shopping, as in "Don't buy that, it makes you look Mommish!" or in other words, unfashionable), the company's performance is hard to berate.
I should like HSNI but this dual personality with the Cornerstone home furnishings troubles me. It doesn't seem like it belongs and maybe should be split off. The actual home shopping network part I like for its earnings power even though I've never ordered from them but I know people that do and they've been very pleased. The company is really growing a presence with their celebrity names offering cookware, fashions, jewelry, fitness gear, and more. Ascena has been making that Charming Shoppes purchase pay off and the insider conviction is "big and beautiful." Then Hot Topic has a surprisingly high yield and could have some serious upside. All three names are more than just plays on living large.
How many American women are "big and beautiful"? Almost 50% of women age 20 to 74 in the US are overweight. And the numbers are expected to grow by 2030. These companies are helping ladies with a more fashionable self-image. As Billy Crystal used to say on SNL years ago "When you look good, you feel good." So can your portfolio.
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