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Players in the Zacks Textile – Apparel industry have been gaining on solid e-commerce operations, thanks to customers’ inclination toward online shopping. At the same time, companies are seeing better traffic trends at brick-and-mortar stores, with things opened up and people stepping out.
High SG&A expenses, especially due to elevated freight and logistic costs, concern many players. Nevertheless, efforts to boost store and digital operations together with robust brand enhancement endeavors keep Ralph Lauren Corp.,Under Armour, Inc., PVH Corp., Crocs, Inc. and Guess?, Inc. well-positioned for gains.
About the Industry
The Zacks Textile – Apparel industry includes companies and lifestyle brands, which 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 as well as 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, to name a few. Some of these companies also deal in 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 as well as internationally.
3 Trends Shaping the Future of the Textile - Apparel Industry
Improved Store Traffic, Solid Digital Trends: Textile-apparel players are benefiting from improved store traffic, with things opened up and people stepping out. That being said, companies continue to gain on robust digital trends even with the stores reopening. Consumers’ growing inclination toward online shopping has put e-commerce at the forefront for players in the textile-apparel industry.
Incidentally, companies in the space have 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 have been aiding digital sales of a number of industry players.
Brand-Enhancing Endeavors: Efforts to bolster brands via marketing strategies, licensing deals, buyouts, innovation and alliances are likely to keep supporting players in the space. Also, focus on keeping pace with changing consumer preferences is a major driver.
Speaking of which, growing inclination toward health and fitness, and elevated exercise at-home trends amid the pandemic have been working in favor of sporting equipment and activewear providers. A number of companies also offer fitness gadgets and adopt other tracking platforms to make the most of consumers’ evolving tastes.
Cost Concerns: Companies are encountering escalated SG&A costs due to several factors, especially higher freight costs. Several firms are encountering supply-chain disruptions stemming from pandemic-led factory closures, congestion at ports and reduced airfreight capacity.
A number of companies projected increased freight and logistic costs for the near term in their last quarterly release. Additionally, elevated marketing expenses and increased investments toward enhancing store and digital operations have been pushing up SG&A costs. Apart from this, a tough and competitive labor market is a concern. These factors pose threats to companies’ margins.
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 #63, which places it in the top 25% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all member stocks, indicates robust 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 is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually becoming more confident about this group’s earnings growth potential. Since the beginning of July 2021, the industry’s consensus earnings estimate for the current financial year has risen 2.1%.
Let’s look at the industry’s performance and current valuation.
Industry Versus Broader Market
The Zacks Textile – Apparel industry has outperformed the broader Zacks Consumer Discretionary sector, while it underperformed the S&P 500 composite over the past year.
The industry declined 3% over this period compared with the broader sector’s drop of 19.1%. Meanwhile, the S&P 500 has rallied 17.7% in the same time frame.
Industry's Current Valuation
On the basis of forward 12-month price-to-earnings (P/E), which is commonly used for valuing consumer discretionary stocks, the industry is currently trading at 14.2X compared with the S&P 500’s 20.04X and the sector’s 21.07X.
Over the last five years, the industry has traded as high as 29.22X, as low as 13.29X, and at the median of 18.45X.
5 Textile - Apparel Stocks to Keep a Close Eye On
Crocs:The designer, developer, manufacturer, marketer and distributor of casual lifestyle footwear and accessories is gaining from sturdy consumer demand for its brands. Crocs’ focus on product innovation and marketing, digital capabilities, and tapping of growth opportunities in Asia bodes well.
The Zacks Consensus Estimate for Crocs’ fiscal 2022 earnings per share (EPS) has climbed 7.4% in the past 30 days. Notably, the Zacks Rank #1 (Strong Buy) stock has moved up 32.6% in the past year. CROX has a long-term earnings growth rate of 15%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Guess?:The company, engaged in designing, marketing, distributing and licensing lifestyle collections of apparel and accessories, currently carries a Zacks Rank #2 (Buy). Guess? has been benefiting from its solid digital business. The company is on track to make progress in its customer-centric initiatives, including omnichannel capabilities and advanced data analytics and customer segmentation.
Guess?’s commitment toward six key strategies also bodes well. These include organization and culture, functional capacities, brand relevance with three main consumer groups (heritage, Millennials and Generation Z customers), customer focus, product brilliance and international footprint. The Zacks Consensus Estimate for the company’s fiscal 2022 EPS has remained unchanged over the past 30 days. Shares of GES have dipped 6% in the past year.
Under Armour: The Zacks Rank #3 company is progressing well with its multi-year transformation plan. The company is focused on strengthening its brand through enhanced customer connections, effective innovation and a strict go-to-market process. Under Armour’s efforts to boost its direct-to-consumer (DTC) business through store expansion initiatives and enhancement of its e-commerce platform bode well.
The Zacks Consensus Estimate for Under Armour’s fiscal 2022 EPS has dropped by a penny in the past 30 days. Shares of the company have moved up 1.5% in the past year. UAA has an estimated long-term earnings growth rate of 25%.
Ralph Lauren: The designer, marketer and distributor of lifestyle products has been benefiting from its efforts to strengthen digital and omni-channel capabilities through investments in mobile, omni-channel and fulfillment. The company’s digital investments are focused on the creation of content for all platforms, enhancing digital capabilities to improve user experience and leveraging Artificial Intelligence and data to serve its consumers more efficiently. Apart from this, Ralph Lauren’s “Next Great Chapter” strategic plan bodes well.
The Zacks Consensus Estimate for Ralph Lauren’s fiscal 2022 EPS has risen by a penny in the past 30 days. RL, with a long-term earnings growth rate of 15%, has seen its shares increase 6.6% in the past year.
PVH Corp.: This designer, marketer and retailer of men's, women's, and children's apparel and accessories has gained 12.8% in a year’s time. PVH Corp. has been witnessing an impressive performance in the digital platform, with customers shifting to online purchases.
The company has been on track with expanding direct-to-consumer digital business and strengthening its network with third-party digital partners. The Zacks Rank #3 company is well placed for growth on the back of strength in many of its brands (especially Tommy Hilfiger) as well as opportunities with regard to distribution.
The Zacks Consensus Estimate for PVH Corp.’s fiscal 2022 EPS has remained stable in the past 30 days. PVH has a long-term earnings growth rate of 37.5%.
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
As one investor put it, “curing and preventing hundreds of diseases…what should that market be worth?” This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Industry Outlook Highlights: Ralph Lauren Corp., Under Armour, Inc., PVH Corp., Crocs, Inc. and Guess?, Inc
For Immediate Release
Chicago, IL – February 1, 2022 – Today, Zacks Equity Research discusses Ralph Lauren Corp. (RL - Free Report) , Under Armour, Inc. (UAA - Free Report) , PVH Corp. (PVH - Free Report) , Crocs, Inc. (CROX - Free Report) and Guess?, Inc. (GES - Free Report)
Industry: Textile - Apparel
Link: https://www.zacks.com/commentary/1859648/5-textile---apparel-stocks-in-focus-on-strong-industry-trends
Players in the Zacks Textile – Apparel industry have been gaining on solid e-commerce operations, thanks to customers’ inclination toward online shopping. At the same time, companies are seeing better traffic trends at brick-and-mortar stores, with things opened up and people stepping out.
High SG&A expenses, especially due to elevated freight and logistic costs, concern many players. Nevertheless, efforts to boost store and digital operations together with robust brand enhancement endeavors keep Ralph Lauren Corp.,Under Armour, Inc., PVH Corp., Crocs, Inc. and Guess?, Inc. well-positioned for gains.
About the Industry
The Zacks Textile – Apparel industry includes companies and lifestyle brands, which 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 as well as 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, to name a few. Some of these companies also deal in 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 as well as internationally.
3 Trends Shaping the Future of the Textile - Apparel Industry
Improved Store Traffic, Solid Digital Trends: Textile-apparel players are benefiting from improved store traffic, with things opened up and people stepping out. That being said, companies continue to gain on robust digital trends even with the stores reopening. Consumers’ growing inclination toward online shopping has put e-commerce at the forefront for players in the textile-apparel industry.
Incidentally, companies in the space have 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 have been aiding digital sales of a number of industry players.
Brand-Enhancing Endeavors: Efforts to bolster brands via marketing strategies, licensing deals, buyouts, innovation and alliances are likely to keep supporting players in the space. Also, focus on keeping pace with changing consumer preferences is a major driver.
Speaking of which, growing inclination toward health and fitness, and elevated exercise at-home trends amid the pandemic have been working in favor of sporting equipment and activewear providers. A number of companies also offer fitness gadgets and adopt other tracking platforms to make the most of consumers’ evolving tastes.
Cost Concerns: Companies are encountering escalated SG&A costs due to several factors, especially higher freight costs. Several firms are encountering supply-chain disruptions stemming from pandemic-led factory closures, congestion at ports and reduced airfreight capacity.
A number of companies projected increased freight and logistic costs for the near term in their last quarterly release. Additionally, elevated marketing expenses and increased investments toward enhancing store and digital operations have been pushing up SG&A costs. Apart from this, a tough and competitive labor market is a concern. These factors pose threats to companies’ margins.
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 #63, which places it in the top 25% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all member stocks, indicates robust 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 is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually becoming more confident about this group’s earnings growth potential. Since the beginning of July 2021, the industry’s consensus earnings estimate for the current financial year has risen 2.1%.
Let’s look at the industry’s performance and current valuation.
Industry Versus Broader Market
The Zacks Textile – Apparel industry has outperformed the broader Zacks Consumer Discretionary sector, while it underperformed the S&P 500 composite over the past year.
The industry declined 3% over this period compared with the broader sector’s drop of 19.1%. Meanwhile, the S&P 500 has rallied 17.7% in the same time frame.
Industry's Current Valuation
On the basis of forward 12-month price-to-earnings (P/E), which is commonly used for valuing consumer discretionary stocks, the industry is currently trading at 14.2X compared with the S&P 500’s 20.04X and the sector’s 21.07X.
Over the last five years, the industry has traded as high as 29.22X, as low as 13.29X, and at the median of 18.45X.
5 Textile - Apparel Stocks to Keep a Close Eye On
Crocs:The designer, developer, manufacturer, marketer and distributor of casual lifestyle footwear and accessories is gaining from sturdy consumer demand for its brands. Crocs’ focus on product innovation and marketing, digital capabilities, and tapping of growth opportunities in Asia bodes well.
The Zacks Consensus Estimate for Crocs’ fiscal 2022 earnings per share (EPS) has climbed 7.4% in the past 30 days. Notably, the Zacks Rank #1 (Strong Buy) stock has moved up 32.6% in the past year. CROX has a long-term earnings growth rate of 15%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Guess?:The company, engaged in designing, marketing, distributing and licensing lifestyle collections of apparel and accessories, currently carries a Zacks Rank #2 (Buy). Guess? has been benefiting from its solid digital business. The company is on track to make progress in its customer-centric initiatives, including omnichannel capabilities and advanced data analytics and customer segmentation.
Guess?’s commitment toward six key strategies also bodes well. These include organization and culture, functional capacities, brand relevance with three main consumer groups (heritage, Millennials and Generation Z customers), customer focus, product brilliance and international footprint. The Zacks Consensus Estimate for the company’s fiscal 2022 EPS has remained unchanged over the past 30 days. Shares of GES have dipped 6% in the past year.
Under Armour: The Zacks Rank #3 company is progressing well with its multi-year transformation plan. The company is focused on strengthening its brand through enhanced customer connections, effective innovation and a strict go-to-market process. Under Armour’s efforts to boost its direct-to-consumer (DTC) business through store expansion initiatives and enhancement of its e-commerce platform bode well.
The Zacks Consensus Estimate for Under Armour’s fiscal 2022 EPS has dropped by a penny in the past 30 days. Shares of the company have moved up 1.5% in the past year. UAA has an estimated long-term earnings growth rate of 25%.
Ralph Lauren: The designer, marketer and distributor of lifestyle products has been benefiting from its efforts to strengthen digital and omni-channel capabilities through investments in mobile, omni-channel and fulfillment. The company’s digital investments are focused on the creation of content for all platforms, enhancing digital capabilities to improve user experience and leveraging Artificial Intelligence and data to serve its consumers more efficiently. Apart from this, Ralph Lauren’s “Next Great Chapter” strategic plan bodes well.
The Zacks Consensus Estimate for Ralph Lauren’s fiscal 2022 EPS has risen by a penny in the past 30 days. RL, with a long-term earnings growth rate of 15%, has seen its shares increase 6.6% in the past year.
PVH Corp.: This designer, marketer and retailer of men's, women's, and children's apparel and accessories has gained 12.8% in a year’s time. PVH Corp. has been witnessing an impressive performance in the digital platform, with customers shifting to online purchases.
The company has been on track with expanding direct-to-consumer digital business and strengthening its network with third-party digital partners. The Zacks Rank #3 company is well placed for growth on the back of strength in many of its brands (especially Tommy Hilfiger) as well as opportunities with regard to distribution.
The Zacks Consensus Estimate for PVH Corp.’s fiscal 2022 EPS has remained stable in the past 30 days. PVH has a long-term earnings growth rate of 37.5%.
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
As one investor put it, “curing and preventing hundreds of diseases…what should that market be worth?” This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.