American Eagle Outfitters (AEO), Abercrombie & Fitch Co. (ANF): Make Fashion a Part of Your Portfolio

Ascena’s downturn

Ascena Retail Group Inc (NASDAQ:ASNA) is my last pick from the apparel industry. The company targets women and teen girls with brands such as Justice, Lane Bryant, and Dressbarn. Last year, the company acquired Charming Shoppes, the parent company of the Lane Bryant and Catherine’s brands. This acquisition was supposed to broaden its customer base and increase revenues. The financial results of the company told the opposite story as earnings fell after the acquisitions.

The company’s Lane Bryant and Dressbarn brands reported a YoY decrease in sales of 6% and 7% respectively. This might be due to the fact that, from a holistic point of view, middle-income customers seem to be suffering on the back of a slow economic recovery. A positive point for the company is that it can benefit from its focus on fashionable plus-size clothing for women. At the moment, the company seems to be faced with one trouble after another. I would wait for it to come out of these troubles if I were to invest in it.

Conclusion

The U.S. apparel industry is dynamic and growing. I believe that direct to customer business will remain the main revenue generating mechanism for apparel stores in the years to come. However, retailers will also benefit by upping their international expansion and better customer engagement. American Eagle Outfitters (NYSE:AEO) seems to be best deal out of the trio, as it has yet to realize its potential from a greater focus on online sales.

The article Make Fashion a Part of Your Portfolio originally appeared on Fool.com and is written by Awais Iqbal.

Awais Iqbal has no position in any stocks mentioned. The Motley Fool recommends Ascena Retail Group. Awais is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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