Retail's Winners Stand Out Clearly

 | Jan 18, 2013 | 12:00 PM EST
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The Super Bowl of retail, the ICR XChange conference, is over, and all the retail experts are headed back to where they came from. When I arrived at the conference,  I had some favorite ideas, and I left feeling even more comfortable with my picks. The bottom line is that there is a sharp divide between management teams that can execute and those that cannot. The divide will be even more distinct in 2013.

A year ago at ICR, Urban Outfitters (URBN) announced that CEO Glen Senk was leaving the company in order to become CEO of David Yurman, a privately held jewelry company. Urban's stock took a hit.

What a difference one year makes. If you had confidence in Dick Hayne, a co-founder of Urban Outfitters who returned to take the helm, you would have an 80% return on your money over the past year. Hayne founded the company with his wife in 1976, and they have plenty invested in the company. Hayne also brought back Ted Marlow, who was previously brand president of the Urban Outfitters division from 2001 to 2010.

Urban Outfitters is one of the most successful retail stocks over the past year. And on Thursday, Hayne suggested that online penetration of 50% over the next five years is possible. To be sure, holiday online penetration was 30%. This is an example of why execution and leadership matter. This is a team that "gets it."

Another great example of leadership mattering is American Eagle Outfitters (AEO). Close to one year ago, Robert Hanson, formerly of Levi Strauss, took over as chief executive. This new management got it right. It brought in fashion trends while relying less on basics. If you did not know, fashion comes with higher price points and is in more demand. A shift away from basics means that this company got the trend right. Same-store sales and the stock price tell the story.

This is in great contrast to Aeropostale (ARO), which relied too much on giftables, basics and logo product. It has been left behind. While Aeropostale management talked quite a bit this week about reversing course, only time will tell. The company has been telling this story for some time. While expectations are on the floor for Aeropostale, I still believe this is a wait-and-see story.

If you don't have the stomach for the volatility of the "teen space," stick with the consistent players. On Thursday, I sat in on the PVH (PVH) and Limited Brands (LTD) breakout sessions. I started buying Limited on the December comp disappointment. The company could have done better at competing with the promotional environment during the holidays. But this company is consistent and has a history of returning cash to shareholders. By the way, I have no doubt that it will get it right domestically as well as capitalizing on an international runway.

As for PVH, the company has significant exposure to Europe, and in that market it is the retailer with the most modest markdowns, according to my checks. It also has the most significant opportunity to take market share and fill the void in the European affordable fashion market.

Bottom line? Management teams matter more than ever in 2013. Stick with the tried and true.

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