Our every-other year treks to Western Pennsylvania for Christmas typically include a post-Christmas stop at one of the area's largest and most popular outlet malls. I look forward to these, because it provides an opportunity to do some light "channel-checks." A good friend of mine has been a stellar retail analyst for many years, and would likely be amused by my very rudimentary channel checks. It was one of these trips two years ago that sparked the idea of taking a position in Fossil (FOSL) , which was a huge winner after an unexpectedly short six-month holding period.
This year's visit to the outlets was two days after Christmas, and the crowds were much smaller than the day after Christmas crowds we've typically encountered. Most of the stores were quite empty. A run through Fossil revealed some great sales, but no customers. My wife remarked that it appeared as though the store was quite "picked-over," which meant that either they'd sold a bunch of stuff the day before, or were not carrying adequate inventory. I've been rebuilding my FOSL position since last month; it is again much disliked, despite taking steps that have made it much leaner than it was two years ago.
It was interesting to see that the dressbarn store is finally vacant. Parent Ascena Retail Group (ASNA) has been shuttering the brand's retail location for months. There was not much action at ASNA's other stores; Ann Taylor, Loft, Lane Bryant and Justice -- but again, that was true of most stores. Tapestry Brands' (TPR) Coach and Kate Spade locations were empty as well. There have been many times I've seen the line at Coach well outside the door. I've had some peripheral interest in TPR for quite some time -- it trades for less than 10x next year's consensus earnings estimates and yields about 5%, but I have not pulled the trigger. Instead, I've taken positions in much more distressed names such as FOSL and ASNA.
I was looking for signs of life at Chico's FAS (CHS) White House Black Market, but did not see any. Again, I may have just picked the wrong day to get a decent sense of who is hot and who is not deep into the fourth quarter. One interesting attribute about CHS, which I was looking at last year but ultimately passed on, is that the company continues paying its $0.0875 quarterly dividend, which equates to a 9.2% yield. CHS liquidity has been declining -- from $229 million or $1.87 per share in cash and short-term investments last year at this time to $128 million ($1.11/share currently), so it will be interesting to see if or when the company cuts the dividend.
The store with the largest crowd seemed to be Vera Bradley (VRA) , but as i was running out of steam, I just did a walk-by and did not enter the store. My wife informed that VRA typically runs some pretty fierce sales, which may have accounted for the crowd. However, to reiterate how light the crowds were on that day, even the Starbucks (SBUX) was empty.
The next day, a late morning trip to Cracker Barrel (CBRL) , was a completely different story. The place was mobbed. Never had a bad meal there yet, but it is tough to get my immediate family to go. I guess they just don't appreciate country cooking in a restaurant chain setting. Thankfully, my in-laws are big fans.
This will be my final column of 2019, and I wish you all, subscribers, columnists and editors, a healthy and prosperous 2020.
