The big apparel sellers are set to report earnings, and the keys investors need to focus in on are clear, according to one analyst.
Second Quarter Guidance
Of course, what's to come is always more important than the past in markets, but this is particularly true for the apparel retailers right now. "It's probably going to be about the second quarter guidance," said John Morris, senior brand apparel analyst at D.A. Davidson & Co.
"The Street and investors have a pretty good sense that the first quarter has been very tough for most brand apparel retailers, because of a number of factors," Morris said.
He listed tax reform and and consumer sentiment as two factors that were far greater tailwinds in 2018 then they are this year.
"Secondly, you've had a very challenging weather season here in the spring," Morris said, adding, "against what was the warmest May on record... last year."
"Who's going to be in a best position place...to rightsize the business, not have too much carry over inventory to get ready for the fall," Morris said is another key.
Retailers a Plain Old Buy?
"I think everybody knows that the deck has been stacked against these brand apparel companies, and that's why the valuations have been pretty attractive," Morris said. Many of those stocks have forward price to earnings ratios of below 20.
So are these stocks ripe for buying? "I think absolutely, because you're talking about a secular trend that is really going to be in place for the next several years, at least," Morris said.
He said the off-priced retailers are positioned to capture more market share as brands move away from full-priced retailers struggle in the face of online competition.