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Christopher & Banks enjoying ride
The retailer's stock price has jumped 25% since August, and analysts give some credit to changes being made at the top.
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Sometimes a business sector gets so beaten down by investors that there's hardly any way to go but up.
That appears to be a large part of the story behind the recent impressive rise in the stocks of many fashion retailers, including Christopher & Banks, the Plymouth-based purveyor of apparel marketed to suburban soccer moms.
The stock has risen about 25 percent since Aug. 1. That's better than the healthy gain of about 17 percent for the Morgan Stanley Retail Index, a benchmark made up of 35 retailers including Abercrombie & Fitch, Limited Brands, Macy's and Twin Cities-based Best Buy Co. Inc. and Target Corp. Like Christopher & Banks, the index bottomed out in July and has been moving up ever since.
"Many of these stocks were just crushed, starting in the fall of 2006," said Keri Spanbauer, a senior research analyst who follows retail and small-cap stocks for Minneapolis-based Thrivent Investment Management.
But does Christopher & Banks deserve the bump?
The company, which reports second-quarter results Sept. 25, hasn't changed a dismal outlook from June that sent its stock reeling to less than $7 a share -- its lowest level in eight years.
After missing analysts' estimates in the first quarter and posting flat same-store sales, the company predicted that second-quarter earnings would be flat to 3 cents per share. Analysts had been expecting 11 cents a share.
Still the stock, with other retailers,' has rebounded since then, closing this week at just more than $10.
Retailers generally may be benefiting from the recent decline in gasoline prices, which has encouraged more consumers to go out shopping and freed up more of their money for discretionary spending, Spanbauer said. Even though retail sales continue to be weak, comparisons with previous, even weaker quarters are helping many companies' results look better, she said.
That could pose a problem for Christopher & Banks, which had surging same-store sales in October -- up 22 percent -- because of a promotion.
But many analysts saw that promotion as a token of the company's changing ways under the leadership of Lorna Nagler, a former Lane Bryant executive who joined Christopher & Banks as CEO last year.
Christopher & Banks traditionally took a low-key approach to marketing, in contrast to the hype-driven world of women's retailing. It rarely advertised or staged promotional sales events.
But Nagler has been changing some of those ways. The company posted better-than-expected results in its first quarter, mostly because of a "friends and family" promotion. It also launched an online shopping site this year.
"These are things the company talked about doing, but Lorna Nagler has come in and actually done them," said Chris Krueger, an analyst who follows the company for Minneapolis-based Northland Securities. He said Nagler also has put a focus on inventory control, with gross margins in the first quarter improving to 43.3 percent, the highest level in two years.
To a lesser extent, the company's standing with investors may be benefitting from this summer's decision to close its 36-store Acorn chain, which catered to upscale shoppers, Krueger said. Acorn was unprofitable, and disposing of it allows the company to focus on Christopher & Banks as well as on C.J. Banks, its chain of plus-size apparel stores, he said. In a recent report, Krueger noted that C.J. Banks still is a young business, with the potential to grow to more than 400 stores. He has a "hold" rating on Christopher & Banks shares.
Even so, Krueger and other analysts say the stock could be attractive to value-oriented investors. The chain of more than 800 stores has a market value of about $395 million.
"Even if business is tough, there is value here," said Howard Tubin, an analyst at RBC Capital Markets in New York City. "The company has a viable concept that serves a purpose in a mall. There's a new CEO making changes for the better. It's probably worth taking a look at."
Susan Feyder • 612-673-1723
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