Apparel, accessories sellers still finding a steady market

Specialty apparel and department store stocks have been battered in recent years as a steady stream of store closings and unenticing merchandise put their future in doubt. But the apparel and accessories business is suddenly looking more fashionable. Last week, Goldman Sachs analyst Alexandra Walvis initiated coverage of Tapestry Inc., Tiffany & Co. and VF Corp. with a buy rating. Several days before that, UBS initiated coverage on a basket of nearly two dozen apparel and accessories stocks, including buy ratings on the likes of Nordstrom and American Eagle Outfitters. The accompanying research note said “the market has exaggerated the ‘stores are dead’ idea.” And earlier in June, Omar Saad of Evercore ISI went so far as to write that “the retailpocalypse is over” as he closed short positions in Kohl’s and Dick’s Sporting Goods and offered a rosy view on the prospects of Macy’s. The retail apocalypse is hardly behind us. More carnage can be expected at the mall as retailers struggle with hefty debt loads and changing consumer habits. But many big names in the clothing business have better days ahead because they’ve made some underappreciated progress in solving some important problems. The biggest challenge for apparel retailers in recent years hasn’t been a failure to adapt to Amazon.com but rather a different kind of online challenge. Social media and live-streamed runway shows have meant that shoppers see new styles faster than ever before — and that trends tend to burn very hot for short periods. Hennes & Mauritz and Inditex’s Zara were trailblazers in nimbly responding to those dynamics. Now the others are starting to get the hang of it. At Urban Outfitters, more than half of the women’s apparel it buys is on a “chase” model, meaning the retailer makes decisions about what to buy closer to when those garments appear on store shelves. Kohl’s says its “speed brands” were 40 percent of its private-label assortment last year. It expects that will rise to 50 percent by the end of the year.