NEW YORK (TheStreet) -- The U.S. Census reported that clothing and clothing accessories stores retail sales grew 1.5% in May, after being flat in April. The year over year growth was clocked at 2.2%. Indicating that the U.S. economy is on solid ground, overall retail sales rose 1.2% in May and April's number was revised upward to 0.2%.
So, what are the best apparel retail stocks that investors should be buying? Here are the top three, according to TheStreet Ratings,TheStreet's proprietary ratings tool.
TheStreet Ratings projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.
Buying an S&P 500 stock that TheStreet Ratings rated a buy yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a buy yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.
Check out which apparel retail companies made the list. And when you're done, be sure to read about which biotech companies to buy now. Year-to-date returns are based on June 11, 2015, closing prices. The highest-rated stock appears last.CAL data by YCharts
3. Caleres, Inc. (CAL)
Rating: Buy, A
Market Cap: $1.4 billion
Year-to-date return: -0.03%
Caleres, Inc., a footwear company, retails and wholesales footwear worldwide. The company operates through two segments, Famous Footwear and Brand Portfolio. It offers licensed, branded, and private-label casual, dress, and athletic footwear products to women, men, and children.
"We rate CALERES INC (CAL) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, revenue growth and reasonable valuation levels. We feel its strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- CALERES INC has improved earnings per share by 25.7% 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 two years. We feel that this trend should continue. During the past fiscal year, CALERES INC increased its bottom line by earning $1.88 versus $1.25 in the prior year. This year, the market expects an improvement in earnings ($1.94 versus $1.88).
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Specialty Retail industry average. The net income increased by 24.8% when compared to the same quarter one year prior, going from $15.43 million to $19.26 million.
- Despite its growing revenue, the company underperformed as compared with the industry average of 9.1%. Since the same quarter one year prior, revenues slightly increased by 1.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- You can view the full analysis from the report here: CAL Ratings Report