Buy apparel stocks ahead of holidays

Soon negative articles will start predicting dire holiday sales for retailers. That will be your chance to buy these surprisingly strong clothing companies.

By Jim Cramer Oct 12, 2010 8:54AM

the streetBy Jim Cramer, TheStreet

 

You want a group that simply has no quit in it? Look at these apparel stocks: Phillips Van Heusen (PVH), Ralph Lauren (RL), VF Corp. (VFC) and Jones Apparel (JNY). They just seem to have game despite the media's quest to make us believe that nothing is selling at the retail level and inventories have to be lean as can be. They are considered pariahs in the media, the whipping boys that have to get hurt as the retailers pull in their horns.

 

It won't stop, either. I believe we will soon be reading about how we will have a bad holiday season and how this group will be under severe pressure.

 

It won't matter that the companies themselves will tell you over and over again that business is strong. Nor will it matter that the valuations are pretty cheap: Jones is trading at 11 times earnings, VF Corp. at 13x, Phillips Van Heusen at 16x and Ralph Lauren at 18x. Given the consistency of the group, it is a wonder they aren’t all trading over where RL is.

 

What's happened, of course, is nothing short of a wholesale transformation of the industry, to where the big guys have tremendous market share.

 

Take PVH. At the department store level, it has successfully accumulated almost 50% share in pants and shirts and more than that in ties. Jones keeps taking more and more doors.


Ralph Lauren is part of the relentless rich-person spending that is not supposed to be happening. VF Corp. has made so many successful bets and had so much growth, especially from North Face, that it deserves to be at its 52-week high right now. Eleven times earnings with a 13 multiple? Silly.

I point out all of this because in three weeks, right after Halloween, we will be in the holiday season. The pattern with the press is to get ahead of the season with negative articles. We got our first negative back-to-school articles in July! In August, pretty much every major media outlet put the hit on the group.

 

I suspect the same thing will happen again. I just want you to steel yourself for it and recognize that all four of these companies have things in hand, and I believe they will have terrific holiday sales and major market share that will surprise people.

 

The facts, though, won't come out until much later. I think the best time to buy will be when the articles appear. Be ready.

 

At the time of publication, Cramer had no positions in the stocks mentioned.

 

Jim Cramer is co-founder and chairman of TheStreet. He contributes daily market commentary for TheStreet's sites and serves as an adviser to the company's CEO.

 

Click here to follow Cramer's Charitable Trust trades.

 

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