On Friday, J. Crew (JCG) cut guidance. The stock promptly fell 20%. It also cut short the rally that was taking place in apparel after earnings from American Eagle (AEO) and Ralph Lauren (RL) in the middle of the week - we even had a follow-through day there!

Why is J. Crew’s profit warning cause such a widespread sell-off, especially when other companies, just days before, had said that their outlook wasn’t as bad as everyone imagined? I think this is an example of short-term, widespread, sell first and ask questions later thinking.

Unlike several other apparel retailers, the earnings estimates for J. Crew had actually come up previously. This made it an exception in a space where the estimates - both near and full-year - had been coming down in names like AEO, RL, and Abercrombie (ANF). With reasonably high expectations, then, it’s fair that the stock would get crushed once it got lumped in with other retailers that had already been whacked.

Still, if you listen to the J. Crew call, CEO Mickey Drexler has some extremely interesting things to say about how the company is being managed (conservatively), the macro environment (tough, but no excuse), and the focus (long-term, i.e. no big markdowns on the way). While I like hearing things like that, and have enormous respect for Drexler as an apparel executive, I still think J. Crew is a dangerous stock to be buying right now. It isn’t exceptionally cheap at 21x forward earnings, and even though their strategy might create long-term value, it could result in some rough short-term results that Wall Street probably won’t overlook.

My favorite part?

J. Crew CEO Mickey Drexler: I just want to say something. This is all a forecast. America in the last six months pretty much gets an F on forecasting in most sectors of America. Understand, this is not a science. Alright? It is not a science. We are here as responsible shareholders of the company to manage this business with the utmost of prudent and conservative ways. I don’t know anyone in the world, frankly, right now who will tell you what the margin will be other than best estimates for the next two months. This is a world that is going through rapid changes. No one forecasted the housing crisis except one or two successful people. No one forecasted the credit crunch. We forecasted a recession in January. Why? Because we felt it was never a downside to run a conservative business and not trying to be greedy at the top end and top line.

Perhaps a little frustration showing through, but very accurate nonetheless.

In short, I think there are more attractive stocks in apparel than JCG - namely, the ones that have recently reported and affirmed or raised guidance.

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Disclosure: I own shares of AEO.