Derek Quick
Uranium/Nuclear & Value Stock Analyst, Trader, Coast Guard Veteran
American Eagle should do well on earnings, as peers Gap and Abercrombie & Fitch jumped 15% and 40% after theirs. Tariff refunds and weight loss from oral GLP-1 drugs should help, while fashion is shifting away from the COVID-era gym clothes that favored Nike and Gen Z and Gen Alpha are adopting millennial nostalgia. x.comÂ
American Eagle's post-earnings drop looks like an opportunity, since the company crushed earnings, and its partnerships with Sydney Sweeney and Ella Langley are not something to bet against. x.comÂ
American Eagle Outfitters looks cheap at 10.2x current-year consensus P/E versus 14.6x for Levi's, which just posted a whopping quarter and guide, and its Sydney Sweeney campaign is back. x.comÂ
American Eagle's governance now outweighs a story that is otherwise likeable. Management bonuses tied to tariff refunds are pretty terrible governance, and the company also sold part of the tariff refund at a discount. Management that brazen raises the question of how else shareholders are being shortchanged. x.com x.comÂ
Abercrombie & Fitch can define what is cool, while Lululemon is a category leader that would have to change its identity to adapt. Abercrombie executed its e-commerce pivot, cut lower-tier mall exposure and de-emphasized logos, freeing it to be more creative. Fashion retail remains tough, with inventory planned 6-9 months out and price-sensitive consumers, but it trades at 7x earnings, buys back 12% of shares a year and holds $14 a share in cash on a $77 stock. x.com x.com x.comÂ
Nike's brand concerns look priced in; stabilization, not sudden revenue acceleration, is what the speculative long needs. A few good campaigns and a return to large stores could help, though China consumers will be a drag. Short-term EPS is a poor indicator, and customers may return after trying other brands. x.com x.comÂ
Lululemon, Nike, Under Armour and On look like cursed value traps because rising competition and unpredictable fashion trends keep eroding their positions. Lululemon has lost its niche dominance as the luxury standard and is now one of a dozen rivals, such as Vuori, Alo and Athleta, chasing the same buyers. Lululemon sits at six-year lows, Nike at 12-year lows, Under Armour at all-time lows and On back at 2022 levels. The products may still be good, but competition is overwhelming. x.com x.com … Show more
Lululemon's weakness is structural, and consumers may also be tightening budgets for aspirational purchases across apparel. The same slowing-sales trend showed up at other brands this quarter, and heavy wholesale promotions were flagged on the On and Amer Sports calls, making apparel a tough industry to invest in. x.comÂ
Rising gasoline prices are short-term bearish for Lululemon, e.l.f. Beauty, Celsius, Nike, Ulta Beauty, Target and Deckers. Consumers squeezed at the pump spend less on discretionary items, while businesses face higher freight and logistics costs that pressure margins. Long term, the weakness should offer a chance to accumulate great brands at cheaper prices. x.comÂ
Nike does not merit a high-teens earnings multiple. Wingstop, CRH and Boston Scientific are much better fallen names right now: after big de-ratings they still trade cheaper than Nike while offering real growth and less long-term risk. x.comÂ
Nike's turnaround is looking much longer than bulls expected, and about 17x forward earnings is not cheap for a business growing low single digits. China sales fell 26% FX-neutral while Adidas' Greater China sales grew 15%, pointing to a Nike problem, not a China problem. Sportswear fell low double digits with Dunk revenue down about 50%, Jordan fell mid-teens, and most PACE savings are expected only in FY29-30; Performance grew high single digits. The must-buy price is $25. x.com x.com x.comÂ
