Brian Sozzi gives his outlook for the apparel sector

Benzinga recently caught up with Wall Street Strategies senior analyst Brian Sozzi to get his take on some of the recent earnings reports to come out of the apparel sector. Here's what he had to say about the general outlook for the sector as a whole:

- "Some of these last minute earning reports have come in rather bleak."

- "I've noticed a change in some of the reports, specifically within the apparel retailers such as Aeropostale, and certainly Gap. Both those stocks are getting crushed and they're getting crushed because the commentary has been very negative regarding margins."

- "We all knew the cotton story was going to hurt margins and earnings as the year progressed, but we're getting more visibility into this right now and it's looking quite ugly."

- "When you hear Gap, which is one of the biggest apparel retailers in the world, say they don't have any leverage over their suppliers, you know there are problems here."

- "[Gap's earnings] report served as a wakeup call that yes, unit costs will likely be 20% higher because of where cotton prices came earlier in the year."

On clear winners and losers:

- "There are winners starting to emerge from the pack of losers. Zumiez would be a winner, Wet Seal would be a winner; Abercrombie is certainly a winner. The case with all of these companies is that they're selling good products--products that people want--where they actually have a chance to recoup some of the higher costs."

- "I think right now you want to start building your list for the back-to-school season, the holiday season, for retail. Wait for this strong sell-off to subside a bit. Just because a company appears that they are winning relative to their group doesn't mean you have to go in and load up on a Wet Seal or a Zumiez. Wait for the selling to subside a bit."

- "In a world where Zumiez is winning and certain teen apparel departments within department stores are winning, there has to be a loser, and Pacific Sunwear is a loser. When I look at their balance sheet, if they cannot show signs of life by the back-to-school shopping season, which I think is going to be the case, I'm wondering if they're going to have problems getting supply for the holiday selling season."

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