Wunderlich Sees Lackluster Q3 For Specialty Apparel Retailers

Underwhelming results are expected from a half-dozen specialty apparel retailers set to post earnings this week, an analyst said Monday.

Wunderlich's Eric Bender said the segment is "in the midst of a multi-year upheaval" while the current season's fashion trends might best be characterized as "bleh" and teen consumers are staying home.

Mostly, Bender advises that investors stay away, although he's enthusiastic about buying G-III Apparel Group, Ltd. GIII ahead of its earnings report Wednesday morning.

The New York-based women's apparel and accessories wholesaler and retailer has routinely beaten earnings expectations in recent quarters and Bender figures a repeat performance is likely.

The second-largest licensee of the Calvin Klein brand does much of its retailing through its Wilsons outlet stores, although last year it completed completed the $50 million acquisition of G.H. Bass from apparel retailer PVH Corp PVH.

Bender said strong fall shipments of outerwear and Calvin Klein merchandise, plus its lack of exposure to foreign exchange makes G-III "one of the best situated apparel companies."

Bender has a Buy rating and $100 target on G-III, which traded recently at $86.66 a share, down about 2 percent.

Although less enthusiastically, Bender also maintains Buy ratings on Guess?, Inc. GES and PVH, both of which are slated to post earnings Wednesday after the market closes. Bender figures they will meet expectations.

Both have worrisome exposure to unfavorable foreign exchange rates and too much denim in a market with waning interest in blue jeans.

But Bender likes Guess's recent cost cutting moves as well as signs that PVH is gaining market share from department stores.

Bender maintains a $27 target on Guess, which traded recently at $21.98 a share, down 3 percent.

For PVH, Bender has a $150, target, although its shares fell 2 percent recently to $124.57 a share.

Teen fashion retailers Aeropostale Inc ARO and Abercrombie & Fitch Co. ANF "will remain in free fall" until pricing stabilizes.

For Abercrombie, Bender has "no idea" what can turn the tide, while at Aeropostale, "the race is on" to see whether it can return to profits before its cash cushion runs out completely.

Abercrombie is set to post results Wednesday before the market opens; Aeropostale results are expected the same day after the market is closed.

At American Eagle Outfitters AEO, Bender offers "one-handed applause" for its recent third-quarter pre-announcement that revealed earnings growth for the first time in nearly two years.

But American Eagle has been without a permanent chief executive for the past year, and with "no real longer-term strategy" Bender maintains a Hold rating.

American's earnings are expected Thursday after the market closes.