Down with clothes!!
No, that doesn't mean you can take off your clothes.
I'm not condemning clothes, rather I'm condemning the stores that sell clothes(ie. Abercrombie and Fitch, Aeropostale, American Eagle, and Nordstorm).
Abercrombie and Fitch has been on several investors' hit-lists because of the:
1. outrageous statements CEO Mike Jeffries made
2. stores' more revealing set of clothing that targets pre-teenagers
3. physical stores themselves (dark, loud music, too much cologne, and half naked, unrealistically skinny models)
4. and intentional lack of clothing for women above size 10
The above have given Abercrombie and Fitch a very negative look in the public eye. If the public doesn't positively think about a brand, they're not going to buy its products because it makes them look bad for supporting a negatively viewed company.
As you can see in the above chart, A&F lost half its market value in less than a few months.
Net income also decreased significantly (4.3 to 3.1)
Why did this happen?
Well, theoretically, this shouldn't have happened in the first place. The economy was recovering, salaries were increasing, the unemployment rate was dropping, and, because of an aggressive fiscal policy, loans were at a low 0.25%.
Then why did A&F and other retail stores grow less than anticipated?
Because youth (the main customers) cared less about wearing the latest brand-name clothes and more about having the most up-to-date technology.
The above graph clearly shows that Abercrombie and Fitch underperformed by roughly 50% when compared to its fellow retail stores (S&P Apparel Retail), and underperformed by more than 150% when compared to the S&P 500.
Retail stores as a whole (S&P Apparel Retail) also underperformed by 50-100% when compared to the S&P 500.
Teenagers would rather spend money on getting the newest technology (ie. iPhone 6 Plus) than on clothing.
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This chart from The Atlantic (early 2013) shows that teenagers are spending almost as much on entertainment (most likely technology) than clothing, a huge difference from the less than 5% teenagers spent on entertainment in 1900 (The Atlantic).
Although this chart is outdated (2003), it still clearly shows how much people stopped spending on apparel and started spending on technology.
Lastly, this image from the Commerce Department shows that Americans are spending more on technology, taking away spending from other categories, including clothing.
This NY Times article cites a number of teenage consumers, CEOs of retail stores, and industry and fashion analysts who all support the thesis that teenagers are shifting their spending money from fashion/retail clothing to technological products. Some even state that technology is the newest form of fashion and that having the latest phone and diamond studded phone case is the newest form of high fashion.
To re-emphasis: people are spending less on brand-named clothes (less of a priority) and more on technology (more of a priority). This will cause clothing stores' revenue to drop, investors to realize the company is overvalued, and sell their shares, bringing down the share price and market value of those companies.
My investment strategy:
If you haven't noticed, I'm very bearish on retail stores/companies (ie. Abercrombie and Fitch, American Eagle, Aeropostale, Nordstorm, etc.).
I am currently shorting the S&P 500 Retail Index and the company 'American Eagle'.
A similar strategy would be to purchase/contract futures predicting a lower S&P 500 Retail Index price.
No, that doesn't mean you can take off your clothes.
I'm not condemning clothes, rather I'm condemning the stores that sell clothes(ie. Abercrombie and Fitch, Aeropostale, American Eagle, and Nordstorm).
Abercrombie and Fitch has been on several investors' hit-lists because of the:
1. outrageous statements CEO Mike Jeffries made
2. stores' more revealing set of clothing that targets pre-teenagers
3. physical stores themselves (dark, loud music, too much cologne, and half naked, unrealistically skinny models)
4. and intentional lack of clothing for women above size 10
The above have given Abercrombie and Fitch a very negative look in the public eye. If the public doesn't positively think about a brand, they're not going to buy its products because it makes them look bad for supporting a negatively viewed company.
Net income also decreased significantly (4.3 to 3.1)
Why did this happen?
Well, theoretically, this shouldn't have happened in the first place. The economy was recovering, salaries were increasing, the unemployment rate was dropping, and, because of an aggressive fiscal policy, loans were at a low 0.25%.
Then why did A&F and other retail stores grow less than anticipated?
Because youth (the main customers) cared less about wearing the latest brand-name clothes and more about having the most up-to-date technology.
The above graph clearly shows that Abercrombie and Fitch underperformed by roughly 50% when compared to its fellow retail stores (S&P Apparel Retail), and underperformed by more than 150% when compared to the S&P 500.
Retail stores as a whole (S&P Apparel Retail) also underperformed by 50-100% when compared to the S&P 500.
Teenagers would rather spend money on getting the newest technology (ie. iPhone 6 Plus) than on clothing.
This chart from The Atlantic (early 2013) shows that teenagers are spending almost as much on entertainment (most likely technology) than clothing, a huge difference from the less than 5% teenagers spent on entertainment in 1900 (The Atlantic).
Although this chart is outdated (2003), it still clearly shows how much people stopped spending on apparel and started spending on technology.
Lastly, this image from the Commerce Department shows that Americans are spending more on technology, taking away spending from other categories, including clothing.
This NY Times article cites a number of teenage consumers, CEOs of retail stores, and industry and fashion analysts who all support the thesis that teenagers are shifting their spending money from fashion/retail clothing to technological products. Some even state that technology is the newest form of fashion and that having the latest phone and diamond studded phone case is the newest form of high fashion.
To re-emphasis: people are spending less on brand-named clothes (less of a priority) and more on technology (more of a priority). This will cause clothing stores' revenue to drop, investors to realize the company is overvalued, and sell their shares, bringing down the share price and market value of those companies.
My investment strategy:
If you haven't noticed, I'm very bearish on retail stores/companies (ie. Abercrombie and Fitch, American Eagle, Aeropostale, Nordstorm, etc.).
I am currently shorting the S&P 500 Retail Index and the company 'American Eagle'.
A similar strategy would be to purchase/contract futures predicting a lower S&P 500 Retail Index price.
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