Express, Inc. (EXPR), Urban Outfitters, Inc. (URBN): Specialty Retailer Selling For A Bargain

Guess has transformed itself in the past decade from a domestic-focused player to a global retailer with more than 1,600 stores in 88 countries. While Europe used to account for 1% of Guess’ sales and Asia was non-existent in its portfolio ten years ago, Guess now derives close to half of its revenues from Europe and Asia, which also deliver higher operating margins than its domestic operations. Guess?, Inc. (NYSE:GES) recently scored a victory in Milan, successfully defending itself against trademark infringement claims brought by Gucci. The words used by the Italian court in the judgment “the remarkable notoriety of the GUESS trademarks” bears testimony to the branding power of Guess.

With customers of specialty retailers are known for being fickle-minded, Urban Outfitters, Inc. (NASDAQ:URBN) customers seems to be of a different breed. According to its analyst day presentation, more than half of Urban Outfitters’ active customers are enrolled in its loyalty program, which drives impressive repeat purchase numbers. The top 10% of its customer makes an average of 12 purchases annually, while the top quartile buy its products 7.5 times per year. Strong customer loyalty, coupled with growth in its direct to consumer sales channels such as mobile have resulted in record sales for Urban Outfitters, Inc. (NASDAQ:URBN).

Conclusion

Express, Inc. (NYSE:EXPR) is cheap with a forward P/E and PEG of 10.8 and 0.63, respectively. I particularly like its prudent customer focused approach to merchandising , which helps to reduce the risk of filling up the stores with unwanted products.

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