Athleisure Remains The Best “Fit” In Fashion Stocks

Investing in fashion stocks will perennially be a risky venture. Due to the fickle nature of the industry, accurately predicting the direction of its market continuously proves to be very difficult. A trendy fashion statement today was likely unthinkable just a few years ago, and probably will become obsolete not too far in the future. 

Because fashion trends run through this seemingly perpetual in-and-out cycle and depend on human taste as much as they do the economy’s standing, it is essential to maintain high levels of vigilance when investing in the fashion market and understand the current moment’s styles with a relatively short leash at the ready.

For the same reasons, however, there is always value somewhere to be found in the fashion sector of the stock market. Of the publicly traded department store brands and clothing retailers, you can capitalize on the fashion crazes of the moment and turn huge profits if you can accurately identify what styles are on the rise.

2017 is no different than other years, with certain areas of the fashion world trending up, while other segments are quickly plunging. 

Over the past year, major department stores have watched their stocks continually diminish in value, save for the annual spike of holiday shopping which remained reasonably lucrative. 

Prominent department stores, such as Macy’s (M) and Nordstrom (JWN), have seen their stocks plummet 12.5% and 9.8% respectively over the past year. Macy’s and J.C. Penny (JCP) have been aggressively shutting down stores to cut their losses. The S&P 500 Department Store Index has dropped a colossal 35% since the December of 2016, conveying the poor state these stocks are in. While a natural drop is expected after the holiday season, many analysts are concerned if department stores can recover.

Other analysts, however, believe now is the time to buy low and invest in these faltering companies. According to this perspective, investors’ current view on department stores is almost too pessimistic, therefore creating value from facing their easiest first quarter comparisons since the recession almost a decade ago. 

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Disclosure: The author of this article does not own any shares mentioned in this article. 

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Bindi Dhaduk 4 years ago Member's comment

I think #BEBE is on the right track. By closing their stores and focusing online, they'll be better positioned to compete with #Amazon, cut costs, and increase efficiencies. Time are changing and the brick and morter stores need to evolve. $AMZN $BEBE

Howie Sandberg 4 years ago Member's comment

While I agree that this strategy could pay off for $BEBE, where does it end? People need brick and morter stores also. And isn't #Amazon heading in the other directions? I heard they were planning to open physical stores in every state. $AMZN

Kurt Benson 4 years ago Member's comment

It is a tough time for department stores. I just don't see how they can compete with #Amazon and others like it. Not to mention, if #Trump can push through his new tax plan, it will kill stores especially, #Walmart and #Target. $AMZN $WMT $TGT

Alexis Renault 4 years ago Member's comment

Why is that?

Kurt Benson 4 years ago Member's comment

American has one of the highest corporate tax rates at 35%. But they rarely pay anywhere near that since there are so many loopholes. Worse, many are "moving" to other countries to avoid the taxes all together.

#Trump's plan has some merits. It doesn't matter where a company is located, it only matters where they sell their products. So if they sell them here, they pay 20% taxes on that. If they sell them overseas they pay no taxes on it at all. So that helps to spur exports.

It also encourages manufacturing in the US, since they can deduct the cost of those goods if sourced from within the US. If they purchase the products from abroad they can't.

But stores like Walmart and Target buy the majority of their products overseas and sell them here in the US. So they'll pay higher taxes than a company which exports a lot of their goods, and sources at least some of their products for the US.

Currency Trader 4 years ago Member's comment

Sounds pretty good to me. What's the downside? Sounds like we'll get a much strong dollar this way.

Kurt Benson 4 years ago Member's comment

The downside is that these big stores like $WMT will go out of business unless they raise prices which help the consumer. It should help the dollar, but it will take time. When that does happen though, #Walmart will get more bang for their buck so it could even out. But it's a big change and there are likely a lot of unforeseen issues which could arise.

Dick Kaplan 4 years ago Member's comment

Don't forget that #Trump is assuming that no other country will react negatively to these aggressive moves. Many could view this as the beginning of a trade war and could react accordingly. While I believe some tax reform is necessary, I view Trump's plan as rather short-sighted, too optimistic and even reckless.

Bruce Powers 4 years ago Member's comment

#Trump wants to lower corporate taxes. Won't that help them?