3 Specialty Retail Stocks Moving The Industry Upward

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

All three major indices traded up today with the Dow Jones Industrial Average ( ^DJI) trading up 67 points (0.4%) at 16,903 as of Friday, June 6, 2014, 3:55 PM ET. The NYSE advances/declines ratio sits at 2,246 issues advancing vs. 764 declining with 128 unchanged.

The Specialty Retail industry as a whole closed the day up 0.5% versus the S&P 500, which was up 0.3%. Top gainers within the Specialty Retail industry included Mecox Lane ( MCOX), up 2.1%, Lentuo International ( LAS), up 1.9%, West Marine ( WMAR), up 3.6%, Build-A-Bear Workshop ( BBW), up 6.1% and XO Group ( XOXO), up 2.9%.

TheStreet Ratings Group would like to highlight 3 stocks pushing the industry higher today:

West Marine ( WMAR) is one of the companies that pushed the Specialty Retail industry higher today. West Marine was up $0.36 (3.6%) to $10.27 on average volume. Throughout the day, 45,161 shares of West Marine exchanged hands as compared to its average daily volume of 54,600 shares. The stock ranged in a price between $9.83-$10.28 after having opened the day at $9.99 as compared to the previous trading day's close of $9.91.

West Marine, Inc. operates as a specialty retailer of boating supplies, gear, apparel, footwear, and other water life-related products primarily in the United States. West Marine has a market cap of $242.3 million and is part of the financial sector. Shares are down 30.4% year-to-date as of the close of trading on Thursday. Currently there is 1 analyst who rates West Marine a buy, no analysts rate it a sell, and none rate it a hold.

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TheStreet Ratings rates West Marine as a hold. The company's strengths can be seen in multiple areas, such as its good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.

Highlights from TheStreet Ratings analysis on WMAR go as follows:

  • Net operating cash flow has increased to -$27.75 million or 27.74% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -8.53%.
  • WMAR has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.22 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 3.6%. Since the same quarter one year prior, revenues slightly dropped by 0.8%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Specialty Retail industry. The net income has decreased by 13.2% when compared to the same quarter one year ago, dropping from -$9.73 million to -$11.02 million.
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, WMAR has underperformed the S&P 500 Index, declining 13.34% from its price level of one year ago. Looking ahead, we do not see anything in this company's numbers that would change the one-year trend. It was down over the last twelve months; and it could be down again in the next twelve. Naturally, a bull or bear market could sway the movement of this stock.

You can view the full analysis from the report here: West Marine Ratings Report

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At the close, Lentuo International ( LAS) was up $0.06 (1.9%) to $3.21 on average volume. Throughout the day, 72,763 shares of Lentuo International exchanged hands as compared to its average daily volume of 70,500 shares. The stock ranged in a price between $3.00-$3.40 after having opened the day at $3.31 as compared to the previous trading day's close of $3.15.

Lentuo International Inc. operates automobile franchise dealerships in the People's Republic of China. Lentuo International has a market cap of $113.7 million and is part of the financial sector. Shares are up 14.6% year-to-date as of the close of trading on Thursday. Currently there are no analysts who rate Lentuo International a buy, no analysts rate it a sell, and none rate it a hold.

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TheStreet Ratings rates Lentuo International as a hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and poor profit margins.

Highlights from TheStreet Ratings analysis on LAS go as follows:

  • LENTUO INTERNATIONAL -ADR reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, LENTUO INTERNATIONAL -ADR turned its bottom line around by earning $0.12 versus -$0.03 in the prior year. This year, the market expects an improvement in earnings ($0.34 versus $0.12).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Specialty Retail industry. The net income increased by 83.1% when compared to the same quarter one year prior, rising from -$6.61 million to -$1.12 million.
  • LAS, with its decline in revenue, slightly underperformed the industry average of 3.6%. Since the same quarter one year prior, revenues slightly dropped by 7.8%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The gross profit margin for LENTUO INTERNATIONAL -ADR is currently extremely low, coming in at 7.54%. Regardless of LAS's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -0.76% trails the industry average.
  • LAS's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 31.14%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.

You can view the full analysis from the report here: Lentuo International Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Mecox Lane ( MCOX) was another company that pushed the Specialty Retail industry higher today. Mecox Lane was up $0.10 (2.1%) to $4.80 on light volume. Throughout the day, 3,165 shares of Mecox Lane exchanged hands as compared to its average daily volume of 19,800 shares. The stock ranged in a price between $4.70-$4.83 after having opened the day at $4.70 as compared to the previous trading day's close of $4.70.

Mecox Lane Limited designs and sells apparel, accessories, and home and healthcare products through its online platform and stores in the People's Republic of China. Mecox Lane has a market cap of $56.7 million and is part of the financial sector. Shares are up 28.8% year-to-date as of the close of trading on Thursday. Currently there are no analysts who rate Mecox Lane a buy, no analysts rate it a sell, and none rate it a hold.

TheStreet Ratings rates Mecox Lane as a sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income and disappointing return on equity.

Highlights from TheStreet Ratings analysis on MCOX go as follows:

  • MECOX LANE LTD's earnings per share declined by 50.0% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern earnings per share over the past two years. During the past fiscal year, MECOX LANE LTD reported poor results of -$2.20 versus -$1.95 in the prior year.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet & Catalog Retail industry. The net income has significantly decreased by 55.5% when compared to the same quarter one year ago, falling from -$7.22 million to -$11.22 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Internet & Catalog Retail industry and the overall market, MECOX LANE LTD's return on equity significantly trails that of both the industry average and the S&P 500.
  • The revenue fell significantly faster than the industry average of 4.1%. Since the same quarter one year prior, revenues fell by 41.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • MCOX's debt-to-equity ratio is very low at 0.02 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Despite the fact that MCOX's debt-to-equity ratio is low, the quick ratio, which is currently 0.63, displays a potential problem in covering short-term cash needs.

You can view the full analysis from the report here: Mecox Lane Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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