What I Like in Retail Stocks

The retail sector continues to be in a lot of trouble. Abercrombie & Fitch (ANF) just reported horrible earnings for the fourth quarter. Sales plunged 19%.

As bad as the earnings were, Abercrombie & Fitch actually beat expectations so the stock is rallying today. Don’t be fooled–shares of ANF are down by 72% in the last year. Things are so rough, the company won’t even provide a forecast for this year.

There aren’t many retail stocks I like right now, but one is Buckle (BKE). The company operates 382 primarily mall-based stores in 39 states. Buckle sells clothes to fashion-conscious 12- to 24-year-olds, and makes about 40% of its sales in denim and jeans.

I have a 20-year-old daughter, and I can tell you from personal experience that Buckle’s typical customer knows no such thing as “weak spending!” J.P. Morgan said Buckle is one of the few retailers “out there with a fashion trend that is working.” Buckle is a great buy because it has been unfairly lumped in with struggling retailers, and should surge after a great quarterly report in a few weeks.

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