3 fashion retailers you should have on your radar

New brands, new stores and business restructuring could expand earnings as consumer spending rises.

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With the recent successful interim results of Premier Investments Limited (ASX: PMV), the specialty fashion retailer, investors should also keep an eye on three other fashion retailers that could benefit from a rise in consumer spending as well as individual business expansion.

Specialty Fashion Group Ltd (ASX: SFH), the operator of such brand stores as Millers, Katies and Crossroads, opened 52 new stores in the first half of FY2014. In addition to the 159 Rivers clothing stores it acquired in November for only $5 million, it now has 1,091 stores.

The FY2014 full-year turnover for the Rivers stores was expected to be about $180 million at the time of acquisition. Its new owners plan to expand the chain to about 220 stores.

The share price has been trending around $0.90c and its dividend yield is 4.4%.

Surfwear fashion icon Billabong International Limited (ASX: BBG) had a dramatic fall in share price in 2010-2013, yet after finding a footing around $0.50c recently, things may start to change. The recent capital raising brought in about $31 million from the retail component at a price of $0.28c a share.

Its interim result was a net loss of $126.3 million including significant items. Group EBITDA was down from $49.3 million to $42.4 million, mostly due to a fall in the Americas business.

The company is going through restructuring and developing its omni-channel marketing and sales. Changes in its supply-chain management are expected to improve efficiencies and lower costs.

OrotonGroup Limited (ASX: ORL), the fashion handbag and accessories retailer, has been active in the last 12 months signing on two new brands, Brooks Brothers and The GAP.

It took over the management of the three existing GAP clothing stores in Australia and plans two new stores in FY2015 through its 10-year agreement with the US clothing retailer. It is also in talks about rolling out the Banana Republic clothing brand in Australia in 2015.

The first four Brooks Brothers stores were opened in February, with another ten planned for calendar year 2014. Revenue is expected to be about $4.4 million in FY2014 and then growing to about $50 million in five years.

The share price is $4.11 and its PE is 19.5. The dividend yield is 8.4%.

Foolish takeaway

The potential gains in business from their acquisitions and restructuring offer investors interesting opportunities.  There is still work to do, so follow them closely. At this stage, I prefer Specialty Fashion Group, but if OrotonGroup can get sales back up to where they were before the end of the Ralph Lauren licencing agreement, it could move forward with the new brands.

Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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