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The Best Buying Opportunities in the Apparel Retail Stocks

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Welcome to Episode #83 of the Zacks Market Edge Podcast.

Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.

In this episode, Tracey is joined by Maddy Johnson, Zacks Editor and podcast host of the Friday Finish Line, to discuss their favorite topic: the retailers.

But not just any retail. They tackle the dreaded apparel retailers, which are the worst performing group within the retail industry.

Many of the apparel retail stocks are trading at new 5-year lows.

Does that mean there are some buying opportunities there?

The Teenager/20-something Retailers

1.       Abercrombie & Fitch (ANF - Free Report) has apparently put itself up for sale. Earnings are out this week. Shares are at 5-year lows.

2.       Express (EXPR) shares have also hit 5-year lows. They trade with a forward P/E of just 11.3.

3.       American Eagle Outfitters (AEO - Free Report) shares are also at multi-year lows but are among the cheapest in this group. They have a forward P/E of just 9.9 and pay a dividend of 4.6%.

What do Tracey and Maddy think about this trend-obsessed apparel niche?

The Big Players

Tracey and Maddy also examine several of the big apparel names that own multiple brands.

1.       Ascena Retail Group , the parent of Ann Taylor and Dress Barn, recently warned on sales. The shares were crushed over 30% and now trade at 5-year lows around $2. Its forward P/E is 16. Panic has gripped the shares. Should you put it on your short list?

2.       Urban Outfitters (URBN - Free Report) had a disappointing first quarter which led to analyst estimate cuts for this fiscal year and next. Free People was a bright spot, as it saw same-store sales growth in the quarter. Shares have fallen to 5-year lows. Urban’s forward P/E is just 12.5. It’s been adding restaurants to some stores. Will bringing in “experiences” work?

3.       Gap (GPS - Free Report) isn’t hitting a 5-year low but shares are still weak. Earnings are expected to fall 1% this fiscal year and rise just 3% next fiscal year. It pays a dividend yielding a juicy 4.1%. Gap also has a forward P/E of only 11.3. Is its most prestigious brand, Banana Republic, about to turn it around?

Some of these retailers aren’t just North American plays. Gap has an extensive global business as does Guess (GES), whose shares are also hitting 5 year lows. But with European growth, and consumer sentiment, on the upswing, could Guess see better times ahead?

Being a value investor, Tracey likes to look for bargains, even in beaten down industries.

Everyone is hating on the apparel retailers right now. And business is definitely challenged.

Find out which of these stocks Tracey thinks is a buying opportunity, if any, on this week’s podcast.

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