Time to Shop for Back-to-School Retailers

While the correction has been brutal, there are definitely many good stock
values now. However, it still is important to remain cautious and focus on those
companies that have near-term catalysts. To this end, it's a good idea to look
at the back-to-school retailers. In fact, according to research from BMO Capital
Markets, it looks like the season is getting off to a strong start. What's
more, there should be continued momentum into the holidays. So what companies
look attractive? Here are my picks: The Childrens Place Retail Store The
Childrens Place Retail Stores (NASDAQ: PLCE ) operates a chain of nearly 1,000
stores in the United States and Canada. The focus is on value apparel for
children (those 10 years old and younger). As a sign of the strength of its
product line, Children's Place has been able to increase prices twice during
the past year. Then again, the company has been adept at keeping ahead of some
of the major industry trends. Children's Place also generates substantial cash
flows, which came to $207 million in 2010 (the sales were $1.7 billion). Express
Express (NYSE: EXPR ) operates more than 590 stores, usually in high-traffic
malls and lifestyle centers. The apparel is focused on the cutting-edge that
is, the kind of things you would see in Vogue and GQ . To maintain its
competitive edge, Express has more than 50 designers in its New York design
studio. And a key part of the strategy is to engage in interactive testing,
which helps to get a sense of customer trends. For the most part, Express has
been able to maintain its pricing power. Actually, in the latest quarter, the
comparable store sales were up 8% and operating margins increased from 12% to
14.9%. American Eagle Outfitters With 930 stores, American Eagle Outfitters
(NYSE: AEO ) focuses on the 15- to 25-year-old demographic. Essentially, the
strategy is to provide quality apparel at affordable prices. With its strong
cash flows, American Eagle has been reinvesting back into its business, such as
with a stronger product line as well as improved store formats. For example, the
company should be positioned nicely to benefit from the urban hipster look. At
the same time, the company is selling at a relatively cheap valuation, with a
price-to-earnings ratio of 15. The dividend yield is 3.80%. Abercrombie & Fitch
It looks like Abercrombie & Fitch (NYSE: ANF ) has continued to demonstrate its
ability to be a fashion leader. As for this year, the popular trend is the
"collegiate prep" look, as popularized on the CW's Gossip Girl . There
also should be lots of traction in the denim business. Keep in mind that ANF's
affluent customers should continue to spend, even if there is a slowdown in
consumer spending. Besides, the company is posting healthy growth rates in
global markets.