Citi's 6 Favorite Picks In The Apparel, Footwear Space

Citi listed its six favorite stocks in the apparel and footwear sector, and said Ralph Lauren Corp RL is the "most attractive" on an EV/FCF basis (12.7x).

Following are Citi's views on its Buy-rated stock picks in the apparel and footwear space

Ralph Lauren

"We forecast that RL has excess FCF to cover our expectations for share buybacks and dividends (est 7.9 percent FCF yield vs. our estimated 6.8 percent required to meet forecasted dividends and buybacks). The company also has a sizeable cash balance ($1.2 billion); however, at the time of the company's Mar 2015 10K, more than 90 percent of cash was held offshore."

Foot Locker, Inc. FL

"FL screens best across the board on a FCF, EBITDA, and P/E basis, trading significantly below our apparel and footwear average. FL is averaging EPS growth in the mid-teens but FCF growth has been more muted due to capex for store expansion."

Related Link: April Channel Checks Into Footwear, Apparel, Accessories Show "Slow Start To Spring"

Dicks Sporting Goods Inc DKS And Hanesbrands Inc. HBI

"DKS and HBI offer FCF yields above coverage average and trade at a +10 percent discount to average EV/FCF. DKS' FCF & EPS growth should accelerate after the company laps incremental 2016 investment spend. HBI offers one of the most attractive FCF growth rates and in prior years has used excess cash for acquisitions."

VF Corp VFC

"VFC and SKX trade at EV/FCF closer to the median/average of our coverage universe. However, SKX exhibits leading FCF growth and VFC have been increasing its capital return program (guiding to $1 billion of buybacks in 2016)."

"VFC's lower FCF growth is partly impacted by a discretionary pension contribution in 2015 as well as higher year-end inventory levels. We forecast that VFC may need to spend existing cash to cover its capital return program in 2016."