Thursday, May 10, 2007

In the Spotlight: Apparel Sector

Reporting Same Store Sale(SSS) this morning.
AEO -10% expected +1.3%
URGI -8% expected -4%
still waiting for ANF, GPS, etc

So far the data is bad. Analysts already knew it was not going to be good, but it seemed to be worse. the divergence of actual fall and expected fall will be the key to drive down this sector. We are going to see enormous weakness in short term.

Slowing customer spending is due to rising debt and a wobbly housing market.

Another issue also contributed to this April report: easter week sale was counted in March instead of April(as last year)

Anyway, this sector will be very weak today and tomorrow.

You may find some good short candidates. (The secret is to find the biggest divergence from actual to estimated data the same way as you are reading earning report)

Looking forward, the next SSS report will be out on June 7th(correct me if I am wrong)
so DT strategy on June 6th will be crystal clear, pre-SSS run on those who drops the most from today to then (my bold guess will be AEO, unless we know bigger loser later today). Mark your calendar now.

Update: ANF data out -15% (v.s. -6.2% expectation), better short than any of the above. GPS -16% (vs -7.1%) also interesting.

All the above 4 retailers I mentioned here have shown weakness in today's trading, however only ANF closed green with 3 cents gain, keep watching them, I do think they are going lower tomorrow.

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