Stock Values

Clothing is a very difficult business to be in. Branding is everything and you either got it or you don’t! In difficult economic times, when an average wage-earning consumer is struggling to meet a higher mortgage payment, an annual update to their wardrobe will move down their priority list. This is why mid-tear clothing brand specialists such as Liz Claiborne Inc. (LIZ) and Jones Apparel Group Inc. (JNY) disappoint and take a big fall.

People still need to wear clothes, and so low end brands fare much better. Also, the high end brands such as Kenneth Cole Productions Inc. (KCP) and Polo Ralph Lauren Corp. (RL) are much less likely to be effected, if for no other reason, because consumers that buy such brands generally do not depend on their next paycheck to maintain their lifestyles.

So, what is an investor to do? Stay away from mid-tear clothiers until there is more certainty on the state of the consumer in the aftermath of the easy credit mortgage debacle, as they may not be able to return to their previous levels of profitability for quite a while.

Low end clothing is a commodity price game, if this is your game you should consider looking into buying a stock of a discount / outlet clothing retailer.

With higher-end folks, the outlook is much better, so there is less risk in jumping in on weakness. I especially like the profitable, relatively small and nimble Kenneth Cole Productions Inc., because of their appeal as an appealing acquisition target for the larger clothiers.