Analyst: Apparel Sales Inflecting; Sees Wider Margins

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Apparel sales are growing faster than than total retail sales while margins in the industry are poised to expand from current 10-year lows, an analyst said Monday. "We don't see any positive fashion trends on the horizon," said Oppenheimer's Anna Andreeva, who noted nonetheless that February was the fourth consecutive month in which apparel sales grew faster than the retail industry as a whole. Prospects for cheaper cotton, improved inventory levels, and better demand could spark wider profit margins in 2015, following a narrowing last year of 110 basis points, Andreeva said Andreeva's current favorite names in apparel: Lululemon Athletica Inc.
LULU
, Ascena Retail Group Inc.
ASNA
and American Eagle Outfitters
AEO
. Also on her list: handbag retailer Coach Inc.
COH
More risky investments in Andreeva's view include Abercrombie & Fitch Co.
ANF
and the fashion accessory concern Fossil Group Inc.
FOSL
. Apparel's upswing relative to total retail sales is accelerating, with the segment outperforming total sales growth by 115 basis points in February, up from 100 in January and 60 in both November and December. It's the first consistent out-performance by apparel since 2009, according to Andreeva, who cited Census Bureau figures. At least four apparel companies have posted same-store sales growth for the current quarter to date, including American Eagle, Urban Outfitters Inc.
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URBN
, Chico's FAS, Inc.
CHS
and Ann Inc.
ANN
. Andreeva currently expects flat margins for the group in 2015, but with improved inventory management "we think that could be conservative," the analyst said.
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Posted In: Analyst ColorReiterationAnalyst RatingsApparel, Accessories & Luxury GoodsConsumer Discretionary
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