Check out Lululemon Athletica’s (LULU) stock performance this week, it’s up over 12% on Q1 performance, both earnings and sales beat estimates.
That’s a huge gain for just one week, but I’ll pass. I’ll pass on Lululemon, The Gap, Ralph Lauren, L Brands, Express, Under Armour and every other brand name clothing retailer stock. Investing in individual stocks is hard enough, but usually there are some basic metrics to guide you. You can look at occupancy rates for hotel stocks like Hilton, or user growth for social media stocks like Facebook, or average cost per click for advertisers for stocks like Google, or cars sold for stocks like Ford and so on.
However with brand name retail stocks it all comes down to fashion and I’m no longer at the age where I care about what’s in style for a 21 year old. When I was in high school and college I could tell you all about Nautica and Tommy Hilfiger Sailing jackets, the intricacies of the color variances of Nike Air Max 95s and Air Force Ones, the vitality of Timberland boots, the necessity of Guess jeans, if the new season of Ralph Lauren polo shirts were better than last season’s, etc. I knew Abercrombie & Fitch, Aeropostale, Victoria’s Secret and The Limited were all hot brands and I knew which brands had seen better days.
At almost 40 years old I’m not in that world anymore, so I would be crazy for me to make a bet on fashion. Sure I could research and see what the internet says about whats in style, but fashion changes on a whim and you have to be a part of youth culture to see style shifts and trends in real time. Only then would you be able to predict the future movement of brand name retail stocks. If Lululemon missed their Q1 earnings and sales estimates because they had the wrong styles in stock their stock could have just as easily gone down 12%. Look at LULU’s 3 month performance for proof:
There are other investment plays one could make in the world of retail regarding mall REITs, or discount apparel stores like Ross and TJ Maxx or large department stores like Sears, JCPenny, Kohl’s and Macy’s. Those are larger sector plays that have significant long term trends and easier to dissect fundamentals. As for brand name retailers, I’ll leave that to the youth and fashion professionals.