Five Retail Stock Ideas For Value Investors

By Alex Gavrish, Etalon Investment Research; author of "Wall Street Back To Basics"

2013 was an active year for apparel retail M&A transactions. rue21 was acquired by private equity group Apax Partners; True Religion Apparel, Inc. ( TRLG) was acquired by private equity firm TowerBrook Capital Partners; The Jones Group Inc. ( JNY) was acquired by private equity firm Sycamore Partners which focuses on retail investments. And of course the takeover battle between Jos. A. Bank Clothiers Inc ( JOSB) and The Men’s Wearhouse, Inc. ( MW), which ended with Men’s Wearhouse acquiring Jos. A. Bank. We decided to take a look and see if there is still some value out there. Below are few interesting value investment ideas in the retail sector:

Retail stock ideas: ANN Inc

Activist investors Engine Capital and Red Alder LLC recently acquired a 1% stake in the company and sent a letter to company’s board of directors with demands to consider strategic alternatives. Possible alternatives include, among other options, recapitalization and sale to private equity or strategic buyer. Ann Inc ( ANN) is a leading national specialty retailer of women's apparel, shoes and accessories. ANN Inc is the parent company of Ann Taylor and LOFT, two of the leading women’s specialty retail fashion brands in North America. In March 2014, Golden Gate Capital, a private equity firm based in San Francisco, disclosed a 9.5% stake in the company. ANN Inc has a market capitalization of $1.88 billion and is currently valued at an EV/EBITDA multiple of x6.3 based on last full fiscal year results. One of the main benefits of ANN Inc’s shares is a lack of debt, which provides the company an extra financial flexibility. The day after disclosure of activist investors’ demands it was reported by Reuters that company has hired JP Morgan to help it evaluate strategic options, which can include a sale of the retailer.

Retail stock ideas: Chico’s FAS, Inc.

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