Dress Barn Is Stepping Out
The slump in consumer spending has flattened sales at most retailers, but Dress Barn (DBRN), whose specialties include apparel for large-size women, has outdistanced many of its peers. And with its shares doubling, to 16.13 on Aug. 12, up from 8 in November, the retailer, with 1,500 stores in 48 states, gets high marks on the Street.
"It's the kind of 'activist' company we have been pursuing," says Eric Heyman, portfolio manager at Olstein Strategic Opportunities Fund (OFSAX), which buys small- to mid-cap stocks it believes have huge growth potential. For Heyman, Dress Barn is activist because it buys underperforming companies and builds up their value. In June, Dress Barn, which caters to women 35 to 55, acquired Tween Brands, whose 908 stores sell clothes for 7- to 14-year-old girls. And four years ago, Dress Barn bought Maurices, which targets women 17 to 34. When the Tween Brands deal is completed in October, Dress Barn will, by avoiding heavy debt, have a "pristine balance sheet with net cash of $1 a share," says Heyman. He says Dress Barn is worth $22 a share.
Robin Murchison of Suntrust Robinson Humphrey says: The mergers "dovetail with Dress Barn's strategy of offering value-priced merchandise to underserved markets." She rates the stock outperform, with a 12-month target of 20.
Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.