For Immediate Release
Chicago, IL – February 12, 2024 – Today, Zacks Equity Research discusses lululemon Athletica Inc. LULU, Ralph Lauren Corp. RL, PVH Corp. PVH and G-III Apparel Group, Ltd. GIII.
Industry: Apparel
Link: https://www.zacks.com/commentary/2223873/4-textile---apparel-stocks-in-focus-on-strong-industry-trends
Companies in the Zacks Textile - Apparel industry are strengthening their omnichannel businesses to explore the potential of both physical and digital facets. Consumers’ growing inclination toward online shopping has put e-commerce at the forefront for players in the textile-apparel industry.
Yet, inflationary pressures, coupled with a higher interest rate environment, are affecting several players. Yet, brand enhancement techniques, including innovations and acquisitions, position lululemon Athletica Inc., Ralph Lauren Corp., PVH Corp. and G-III Apparel Group, Ltd. well.
About the Industry
The Zacks Textile - Apparel industry includes companies and lifestyle brands that manufacture, design, distribute, source, market and sell apparel, footwear and accessories for men and women. These include fashion apparel like dresses, pants, skirts, shorts, shirts, jackets, blouses, and knitwear and intimate apparel like underwear and shapewear. The industry also comprises companies offering apparel for a healthy lifestyle and athletic activities, such as yoga, running and training.
Some companies also deal with fitness-related accessories like gloves, bags, headwear and sports masks. The industry participants operate through direct-to-consumer (brick-and-mortar and online), wholesale and licensing distribution channels. Most players operate through stores and digital networks in the United States and internationally.
3 Trends Shaping the Future of the Textile - Apparel Industry
Improved Store Traffic, Solid Digital Trends: As people are effortlessly moving between physical and digital channels, textile-apparel players continue to invest in enhancing guest experience in all touch points. The industry participants are focused on investments to enhance their in-store experiences. Companies in the space are seeing improved brick-and-mortar sales, driven by rising consumer traffic in stores.
Meanwhile, consumers’ growing inclination toward the convenience of online shopping has put e-commerce at the forefront for players in the textile-apparel industry. They have long been investing in improving e-commerce sites, upgrading mobile apps, enhancing payment systems, linking online and store operations, and increasing fulfillment capabilities. Buy online, pickup in store and curbside delivery options continue to gain traction for many industry players.
Brand-Enhancing Endeavors: Efforts to bolster brands via marketing strategies, buyouts, alliances and licensing deals will likely keep supporting textile-apparel players. Product launches are also essential for their growth. These companies regularly enhance products through innovation to remain competitive and tap evolving consumer preferences.
Cost Concerns: Companies in the textile-apparel space are battling input cost inflation, which is putting pressure on their profits. Persistent supply-chain bottlenecks stemming from port congestions, higher freight prices and wide-scale shortages of materials are concerning. Textile-apparel players have also been witnessing higher SG&A costs.
Increased marketing expenses and investments toward enhancing store and digital operations have spiked SG&A costs. These factors pose threats to companies’ margins. The impacts of lower demand due to inflation, rising interest rates and reduced benefit support are some other major hurdles for industry participants.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Textile – Apparel industry is housed within the broader Zacks Consumer Discretionary sector. The industry currently carries a Zacks Industry Rank #109, which places it in the top 44% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the top 50% of the Zacks-ranked industries results from a positive aggregate earnings outlook for the constituent companies.
Let’s look at the industry’s performance and current valuation
Industry vs. Broader Market
The Zacks Textile - Apparel industry has outperformed the broader Zacks Consumer Discretionary sector, while underperforming the S&P 500 composite in the past year.
The industry has gained 12.2% during this period compared with the broader sector’s growth of 5.5%. Meanwhile, the S&P 500 has rallied 22.6% in the same period.
Industry's Current Valuation
On the basis of forward 12-month price-to-earnings (P/E), commonly used for valuing consumer discretionary stocks, the industry is currently trading at 15.23X compared with the S&P 500’s 20.74X and the sector’s 17.77X.
Over the last five years, the industry traded as high as 29.58X, as low as 9.73X and at the median of 16.23X.
4 Textile -Apparel Stocks to Keep a Close Eye On
G-III Apparel: The Zacks Rank #1 (Strong Buy) company designs, sources and markets women's and men's apparel. It has been accelerating digital growth and strives to become the best omnichannel organization. The company undertakes several strategies, including acquisitions and licensing of well-known brands, to expand its product portfolio, and make itself a diversified apparel and accessories company. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for GIII’s current fiscal-year earnings per share (EPS) has been unchanged in the past 30 days at $3.97. Shares of G-III Apparel have gained 45.2% in the past six months.
lululemon: The yoga-inspired athletic apparel company currently carries a Zacks Rank #2 (Buy). LULU is capitalizing on the importance of physical retail and the convenience of online engagement. The company continues to benefit from the progress of its Power of Three X2 growth strategy, which focuses on product innovation, guest experience and market expansion. LULU is successfully navigating market dynamics and optimizing its cost structures to achieve improved profitability.
The Zacks Consensus Estimate for lululemon’s current fiscal year’s EPS has moved up by a penny in the past 30 days to $12.47. The LULU stock has gained 23% in the past six months.
PVH Corp: This designer, marketer and retailer of men's, women's, and children's apparel and accessories has rallied 48.1% in the past six months. PVH Corp has long been gaining from the continued momentum in its core brands — Calvin Klein and Tommy Hilfiger. The Zacks Rank #2 company’s strong execution of the PVH+ Plan bodes well. PVH is focused on fueling digital growth by developing a holistic distribution strategy.
The Zacks Consensus Estimate for PVH’s current fiscal-year EPS has been unchanged in the past 30 days at $10.46.
Ralph Lauren: The Zacks Rank #2 company is a major designer, marketer and distributor of premium lifestyle products. Ralph Lauren is making significant progress in expanding omni-channel capabilities through investments. RL is creating a simplified global organizational structure and rolling out improved technological capabilities as part of its Next Great Chapter plan.
The Zacks Consensus Estimate for Ralph Lauren’s current fiscal-year EPS moved up 0.4% in the last seven days to $9.52. RL shares have gained 40.5% in the past six months.
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