Retail Trio: Shopping for Buybacks

11/19/2015 7:00 am EST


David Fried

Editor, The Buyback Letter

In selecting stocks for his model portfolio, David Fried focuses exclusively on companies involved in share buyback or repurchase programs. Here, the editor of The Buyback Letter highlights three recent ideas in the retail sector.

Gap (GPS)

Clothing giant Gap is one of the world's largest specialty retailers, with some 3,300 company stores and five of the most recognized apparel brands in the world, Gap, Banana Republic, Old Navy, Intermix, and Athleta.

Similar to other mall-based retailers, Gap is in the process of transitioning to a more digital-centric business model. It plans to close more than 100 of its mall stores over the next two years to focus resources on e-commerce.

Last year Gap introduced an option to reserve online and pick up in the store, to integrate its mobile and physical customer experiences.

We’ve bought it several times before, once in 2010 and twice in 2012. Management has reduced shares outstanding by 6.28% in the last 12 months.

Select Comfort (SCSS)

Select Comfort is the Minneapolis-based parent of bed, mattress, and bedding retailer Sleep Number stores, operating 463 retail stores in the US.

Their adjustable-firmness mattresses feature air-chamber technology. Their new sensor technology monitors each individual’s movement and average heart and breathing rates.

It then communicates how you slept and what adjustments you can make to optimize your sleep.

Second quarter net sales increased 17% to a record $275 million while EPS rose 31%. Management has reduced shares outstanding by 6.35% in the last 12 months.

Vipshop Holdings (VIPS)

Based in Guangzhou, China, Vipshop operates as an online discount retailer for brands in China.

The Vipshop marketplace relies heavily on flash sales to keep customers coming back to its site and has found a comfortable niche of selling leftover and off-season products from larger retailers.

While China's economy is still ailing, its e-commerce sector continues to serve as a driver of economic growth.

Vipshop reported Q2 results: total net revenue up 77.6%, gross profit up 78.6%, income from operations up 192%, all over the prior-year period.

Meanwhile, management has reduced the number of shares outstanding by 12.59% in the past 12 months.

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