Anyone have opinions on the current valuations in this industry? Some are trading at
I’ve always believed retail clothing are trading stocks, not buy and hold.
True story. They are very seasonal and prone to significant volatility in the fundamentals. It’s one of the most competitive businesses out of any publicly traded stock. Just a hard place to be.
There is a fortune to be made if you love walking the malls and doing in depth channel checks but you have to be a real fashion guru to pull it off. It’s extremely time intensive. I forgot her name, but there is some fashion diva who has 20% compound annual returns just trading retail stocks based on her checks.
If you’re a schlub like me who sits around in his pajamas working from home most days (so win), and who passionately hates going to the mall, retail fashion stocks are not a good place to be. I systematically avoid them.
Anyway to answer the question, the “value” depends on what the near-term results will be. If they can’t move inventory, the companies will have brutal write downs at the gross margin line and have significant P&L deleverage. If they have a good seasonal buy and comps are good, they could have big earnings beats. You won’t hear me say the value is determined by short-term factors very often but with these stocks it is – the business is inherently so awful (high fixed costs, competitive, prone to value destruction) that IMO there isn’t a lot of “intrinsic value” at all in these concepts (almost all of them go BK eventually), it is more about nailing the inflection or riding a wave of momentum based on short-term performance.
Any business where your entire value add is buying someone else’s product, marking it up, and trying cover high fixed costs is a lousy business.
COH looks attractive, but I’m going to wait until Stuart Vevers’ designs hit the stores.
#Cantwait
Bro for AF Boardmember! Respect.
Good point, I never realized how short term focused these stocks are. What I find interesting is that most of these companies haven’t really reduced their store count since 2009. Maybe they were locked into operating leases, but I figured there would have been more due to pricing competition, poor consumer spending, unemployment, etc. But now that seems to be changing with some companies targeting a 7%-10% store count reduction. If this can improve margins and comp store sales turns positive then they should be able to have some upward momentum.
But overall what a bad business. Not sure I was fully aware until now lol.
It is really hard to reduce store count when they have long-term operating leases. You can’t flip a switch and get out of those, you usually have to declare bankruptcy. Keep in mind that if they close poorly performing stores, they usually eat it on the capex investment (you can’t redeploy capital spent on paint, carpet, fixtures, etc.) and sales will also decrease. Margins may go up but at what cost?
It’s just a bad business, easier to look elsewhere.
I’ll never buy their stock again after they stopped making their pants see-through. Not supporting those types of decisions.
“I’m eager to hear diverse perspectives on the present valuations within the charcoal brand industry, with a specific focus on expectations for the year 2024. It seems that some companies are experiencing fluctuations in their trading positions. If anyone has insights into the factors influencing these valuations or predictions for how the market might evolve in 2024, I’d love to hear your thoughts. Your opinions on the current state and future prospects of charcoal brands would contribute significantly to my understanding of the industry. Thank you for sharing your expertise!”
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