Apparel subsector outperforms larger S&P 500

Fashion

S&P 500 profits are expected to grow around 5 percent against last year’s fourth quarter, slightly below the 9.3 percent gain predicted by analysts. In comparison, the apparel retail sub-sector of the S&P 500 is forecast to register a 28 percent

year-over-year increase in fourth-quarter earnings, according to data from FactSet.

As polled

by FactSet, analysts believe the fourth quarter will be a strong quarter for retail. Of the 13 retail sub-industries in the S&P 500, ten are predicted to see earnings growth in the last three months of the year while four of these ten sub-industries are projected to see double-digit earnings growth, led by the Apparel Retail (+27.5 percent).

“Within the Apparel Retail sub-Industry, all six companies are projected to see double digit earnings growth: Urban Outfitters (92.1 percent), Abercrombie & Fitch (68.5 percent), Gap Inc. (55.4 percent), TJX Companies (23.1 percent), Ross Stores (22.3 percent), and Limited Brands (17.3 percent),” advanced FacSet.

While Urban Outfitters’ stock is up about 37 percent for the year-to-date, beating the S&P 500 by about 25 percentage points; its peer Abercrombie & Fitch’s shares are off about 9 percent for the year-to-date. It’s worthy of note that he stock currently trades at a 23 percent discount to its own five-year average and that has become an eye candy for analysts and investors alike.

Gap is other stock that has raised a good deal of expectation as its stock is up almost 90 percent for the year-to-date, highlighted ‘Investor Place’. In the same line, Limited Brands has gained 20 percent since January.

On its side, Aeropostale is also expected to struggles this coming quarter. Analysts polled by Thomson Reuters project Aeropostale Inc. to record slightly weaker third quarter profits. American Eagle Outfitters Inc. NYSE:AEO, a recent standout in the teen sector is expected to post double-digit earnings gains.

The consensus forecast for PVH’s fiscal third quarter calls for year-over-year earnings per share (EPS) growth of almost 18 percent to 2.30 dollars. As stressed by ‘Benzinga’, the consensus EPS estimate was 2.25 dollars just 60 days ago, and that analysts have underestimated PVH's per-share earnings for more than ten quarters.