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5 Solid Bets in the Promising Retail-Apparel & Shoes Industry
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While coronavirus-inflicted challenges persist, the Retail - Apparel And Shoes industry has been steadily making its way out of the woods and is now set for complete recovery in 2022. As the economy reopened, pandemic-led restrictions eased and outdoor movement gathered pace, the apparel industry has blossomed. Sales at clothing & clothing accessories stores have been increasing as more people are venturing out and demand is picking up.
Meanwhile, companies have been directing resources toward digital platforms, accelerating fleet optimization and augmenting the supply chain. Retailers have been focusing on superior product strategy, advancement of omni-channel capabilities and prudent capital investments. Tapestry, Inc. (TPR - Free Report) , Capri Holdings Limited (CPRI - Free Report) , Boot Barn Holdings, Inc. (BOOT - Free Report) , Genesco Inc. (GCO - Free Report) and Chico's FAS, Inc. are set to cash in on the opportunities.
About the Industry
The Zacks Retail - Apparel And Shoes industry comprises companies that offer apparel, footwear, accessories, intimates and beauty products as well as fitness and lifestyle products for use in yoga, training and sports under various brands in domestic and international markets. Quite a few players offer bag collections, including business cases, computer bags and backpacks; leather goods, such as wallets, card cases, travel organizers, and belts; and watches, sunglasses, fragrances and ready-to-wear as well as cold-weather accessories. Markedly, companies showcase products to customers directly through their branded retail stores, mobile applications, catalogs and websites. Again, some industry participants provide products via department stores, specialty retailers, third-party e-commerce sites, and franchisees who operate brand-dedicated stores.
4 Key Trends to Watch in the Retail - Apparel And Shoes Industry
Consumers’ Willingness to Spend: Industry participants have been focusing on deepening engagements with consumers, creating innovative and compelling products, and enhancing digital and data analytics capabilities. The launch of newer styles, customization options and refreshed store environments allow them to woo shoppers. A report by Mastercard SpendingPulse indicates that the apparel category emerged as the biggest winner in the last holiday season. The report highlighted a year-over-year increase of 47.3% in apparel sales during the festive season, running from Nov 1 through Dec 24. Holiday sales data from National Retail Federation further validates that Americans spent more money on apparel. The retail trade group stated that sales at clothing and clothing accessory stores grew 33.1%.
Focus on Capital Discipline, Enhancing Brands: The industry players have been making strides to strengthen their financial position and improve profitability. In fact, they have been taking every step, from managing inventory and closing underperforming stores to optimizing capital expenditures and enhancing operational efficiency. In fact, companies’ sustained focus on cost containment, inventory management and speed-to-market initiatives have kept them afloat in a tough retail landscape. Efforts to enhance brands via marketing strategies, buyouts, innovations and alliances are likely to keep supporting players in the space. Also, the focus on keeping pace with changing consumer preferences is a major driver.
Diversification & Digitization Key to Growth: With the change in consumer shopping patterns and behavior amid the pandemic, industry participants have been playing dual in-store and online roles. Apart from upgrading digitally, companies are coming up with unique products and better deals. Initiatives such as building omni-channel, coming up with loyalty and marketing programs, enhancing supply chain and providing faster delivery options, be it doorstep delivery, curbside pickup or buy online and pick up at store, are worth mentioning. Simultaneously, companies are investing in renovation, improved checkouts and mobile point-of-sale capabilities to keep stores relevant. Keeping in mind consumers’ product preferences and growing inclination toward online shopping, companies have been replenishing shelves with in-demand merchandise and ramping up investments in digitization.
Focus on Margins: The industry is quite fragmented, with companies vying for a bigger slice of the pie on attributes such as price, products and speed-to-market. Addressing these, a significant number of players in the industry have been investing in strengthening their digital ecosystem and delivery capabilities. While these endeavors boost sales, they entail high costs. Apart from these, higher marketing, advertising and other store-related expenses might compress margins. Meanwhile, the industry is dealing with supply-chain bottlenecks, labor challenges and rising freight charges. That said, sustained cost-containment measures are needed for managing margins.
Zacks Industry Rank Indicates Solid Prospects
The Zacks Retail - Apparel And Shoes industry is a group within the broader Zacks Retail – Wholesale sector. The industry currently carries a Zacks Industry Rank #96, which places it in the top 39% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates encouraging near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform 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 positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually gaining confidence in this group’s earnings growth potential. The industry’s bottom-line estimate for the current financial year has jumped almost 11.3% in the past year.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Versus Broader Market
The Zacks Retail - Apparel And Shoes industry has underperformed the broader Zacks Retail – Wholesale sector and the Zacks S&P 500 composite over the past year.
While the stocks in this industry have collectively declined 45.2%, the Zacks S&P 500 composite has risen 13.4%. Meanwhile, the Zacks Retail – Wholesale sector has fallen 19.4%.
One-Year Price Performance
Industry's Current Valuation
On the basis of forward 12-month price-to-earnings (P/E), which is commonly used for valuing retail stocks, the industry is currently trading at 11.32X compared with the S&P 500’s 19.17X and the sector’s 22.65X.
Over the last five years, the industry has traded as high as 115.63X and as low as 8.57X, with the median being at 14.83X, as the chart below shows.
Price-to-Earnings Ratio (Past 5 Years)
5 Stocks Worth Considering
Boot Barn Holdings: This lifestyle retailer of western and work-related footwear, apparel and accessories has been successfully navigating through the challenging environment, courtesy of merchandising strategies, omni-channel capabilities and better expense management as well as marketing. This, combined with the expansion of the store base, has helped Boot Barn Holdings gain market share and strengthen its position in the industry.
Impressively, Boot Barn Holdings has an estimated long-term earnings growth rate of 20%. The Zacks Consensus Estimate for its current-fiscal earnings per share (EPS) has been stable over the past 30 days. We also note that shares of this Zacks Rank #1 (Strong Buy) company have surged 41.7% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: BOOT
Capri Holdings: This designer, marketer, distributor and retailer of branded apparel and accessories has been reinforcing its position in the luxury fashion space and looks to maximize the potential of Versace, Jimmy Choo and Michael Kors brands through expanded products and categories. Capri Holdings has been investing significantly in digital analytics and upgrading the e-commerce platform.
Capri Holdings’ bottom line has outperformed the Zacks Consensus Estimate by a wide margin in the trailing four quarters. This Zacks Rank #1 company has an estimated long-term earnings growth rate of 53.9%. Meanwhile, the Zacks Consensus Estimate for its current-fiscal EPS has risen 8.5% over the past 30 days. Shares of the company have fallen 13.8% in the past year.
Price and Consensus: CPRI
Genesco: This Nashville-based specialty retailer of footwear and accessories is poised to benefit from digital and omnichannel potential, robust full-priced selling, merchandise offerings and cost management. A healthy balance sheet allows Genesco’s to make strategic investments while also returning capital to shareholders.
Remarkably, Genesco’s bottom line has outperformed the Zacks Consensus Estimate in the last four quarters by a wide margin. Meanwhile, the Zacks Consensus Estimate for its current-fiscal EPS has improved by a penny over the past 30 days. Shares of this Zacks Rank #1 company have soared 22.3% in the past year.
Price and Consensus: GCO
Chico's FAS: This Florida-based fashion retailer’s efforts to become a “digital-first, customer-led” company coupled with a strong portfolio of three unique brands, namely, Chico's, WHBM and Soma, position it well to expand customer base and market share. Product enhancement, planned inventories, operating discipline and marketing strategies help drive full-price selling, lower markdowns and produce higher gross margin.
Chico's has a trailing four-quarter earnings surprise of 298.9%, on average. Meanwhile, the Zacks Consensus Estimate for its current-fiscal EPS has risen 14.3% over the past seven days. Markedly, shares of this Zacks Rank #1 company have advanced 32% in the past year.
Price and Consensus: CHS
Tapestry: This provider of luxury accessories and branded lifestyle products has been benefiting from the successful execution of the Acceleration Program. The program aims to transform the company into a leaner and more responsive organization. It intends to build significant data and analytics capabilities, focusing on enhancing digital and omni-channel capabilities and operating with a clearly defined path and strategy for each of its brands, namely, Coach, Kate Spade, and Stuart Weitzman.
Tapestry has a trailing four-quarter earnings surprise of 28.2%, on average. It has an estimated long-term earnings growth rate of 12.5%. The Zacks Consensus Estimate for its current-fiscal EPS has moved up 3.7% in the past 30 days. Notably, shares of this Zacks Rank #2 (Buy) company have declined 25.9% in the past year.
Price and Consensus: TPR
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5 Solid Bets in the Promising Retail-Apparel & Shoes Industry
While coronavirus-inflicted challenges persist, the Retail - Apparel And Shoes industry has been steadily making its way out of the woods and is now set for complete recovery in 2022. As the economy reopened, pandemic-led restrictions eased and outdoor movement gathered pace, the apparel industry has blossomed. Sales at clothing & clothing accessories stores have been increasing as more people are venturing out and demand is picking up.
Meanwhile, companies have been directing resources toward digital platforms, accelerating fleet optimization and augmenting the supply chain. Retailers have been focusing on superior product strategy, advancement of omni-channel capabilities and prudent capital investments. Tapestry, Inc. (TPR - Free Report) , Capri Holdings Limited (CPRI - Free Report) , Boot Barn Holdings, Inc. (BOOT - Free Report) , Genesco Inc. (GCO - Free Report) and Chico's FAS, Inc. are set to cash in on the opportunities.
About the Industry
The Zacks Retail - Apparel And Shoes industry comprises companies that offer apparel, footwear, accessories, intimates and beauty products as well as fitness and lifestyle products for use in yoga, training and sports under various brands in domestic and international markets. Quite a few players offer bag collections, including business cases, computer bags and backpacks; leather goods, such as wallets, card cases, travel organizers, and belts; and watches, sunglasses, fragrances and ready-to-wear as well as cold-weather accessories. Markedly, companies showcase products to customers directly through their branded retail stores, mobile applications, catalogs and websites. Again, some industry participants provide products via department stores, specialty retailers, third-party e-commerce sites, and franchisees who operate brand-dedicated stores.
4 Key Trends to Watch in the Retail - Apparel And Shoes Industry
Consumers’ Willingness to Spend: Industry participants have been focusing on deepening engagements with consumers, creating innovative and compelling products, and enhancing digital and data analytics capabilities. The launch of newer styles, customization options and refreshed store environments allow them to woo shoppers. A report by Mastercard SpendingPulse indicates that the apparel category emerged as the biggest winner in the last holiday season. The report highlighted a year-over-year increase of 47.3% in apparel sales during the festive season, running from Nov 1 through Dec 24. Holiday sales data from National Retail Federation further validates that Americans spent more money on apparel. The retail trade group stated that sales at clothing and clothing accessory stores grew 33.1%.
Focus on Capital Discipline, Enhancing Brands: The industry players have been making strides to strengthen their financial position and improve profitability. In fact, they have been taking every step, from managing inventory and closing underperforming stores to optimizing capital expenditures and enhancing operational efficiency. In fact, companies’ sustained focus on cost containment, inventory management and speed-to-market initiatives have kept them afloat in a tough retail landscape. Efforts to enhance brands via marketing strategies, buyouts, innovations and alliances are likely to keep supporting players in the space. Also, the focus on keeping pace with changing consumer preferences is a major driver.
Diversification & Digitization Key to Growth: With the change in consumer shopping patterns and behavior amid the pandemic, industry participants have been playing dual in-store and online roles. Apart from upgrading digitally, companies are coming up with unique products and better deals. Initiatives such as building omni-channel, coming up with loyalty and marketing programs, enhancing supply chain and providing faster delivery options, be it doorstep delivery, curbside pickup or buy online and pick up at store, are worth mentioning. Simultaneously, companies are investing in renovation, improved checkouts and mobile point-of-sale capabilities to keep stores relevant. Keeping in mind consumers’ product preferences and growing inclination toward online shopping, companies have been replenishing shelves with in-demand merchandise and ramping up investments in digitization.
Focus on Margins: The industry is quite fragmented, with companies vying for a bigger slice of the pie on attributes such as price, products and speed-to-market. Addressing these, a significant number of players in the industry have been investing in strengthening their digital ecosystem and delivery capabilities. While these endeavors boost sales, they entail high costs. Apart from these, higher marketing, advertising and other store-related expenses might compress margins. Meanwhile, the industry is dealing with supply-chain bottlenecks, labor challenges and rising freight charges. That said, sustained cost-containment measures are needed for managing margins.
Zacks Industry Rank Indicates Solid Prospects
The Zacks Retail - Apparel And Shoes industry is a group within the broader Zacks Retail – Wholesale sector. The industry currently carries a Zacks Industry Rank #96, which places it in the top 39% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates encouraging near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform 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 positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually gaining confidence in this group’s earnings growth potential. The industry’s bottom-line estimate for the current financial year has jumped almost 11.3% in the past year.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Versus Broader Market
The Zacks Retail - Apparel And Shoes industry has underperformed the broader Zacks Retail – Wholesale sector and the Zacks S&P 500 composite over the past year.
While the stocks in this industry have collectively declined 45.2%, the Zacks S&P 500 composite has risen 13.4%. Meanwhile, the Zacks Retail – Wholesale sector has fallen 19.4%.
One-Year Price Performance
Industry's Current Valuation
On the basis of forward 12-month price-to-earnings (P/E), which is commonly used for valuing retail stocks, the industry is currently trading at 11.32X compared with the S&P 500’s 19.17X and the sector’s 22.65X.
Over the last five years, the industry has traded as high as 115.63X and as low as 8.57X, with the median being at 14.83X, as the chart below shows.
Price-to-Earnings Ratio (Past 5 Years)
5 Stocks Worth Considering
Boot Barn Holdings: This lifestyle retailer of western and work-related footwear, apparel and accessories has been successfully navigating through the challenging environment, courtesy of merchandising strategies, omni-channel capabilities and better expense management as well as marketing. This, combined with the expansion of the store base, has helped Boot Barn Holdings gain market share and strengthen its position in the industry.
Impressively, Boot Barn Holdings has an estimated long-term earnings growth rate of 20%. The Zacks Consensus Estimate for its current-fiscal earnings per share (EPS) has been stable over the past 30 days. We also note that shares of this Zacks Rank #1 (Strong Buy) company have surged 41.7% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: BOOT
Capri Holdings: This designer, marketer, distributor and retailer of branded apparel and accessories has been reinforcing its position in the luxury fashion space and looks to maximize the potential of Versace, Jimmy Choo and Michael Kors brands through expanded products and categories. Capri Holdings has been investing significantly in digital analytics and upgrading the e-commerce platform.
Capri Holdings’ bottom line has outperformed the Zacks Consensus Estimate by a wide margin in the trailing four quarters. This Zacks Rank #1 company has an estimated long-term earnings growth rate of 53.9%. Meanwhile, the Zacks Consensus Estimate for its current-fiscal EPS has risen 8.5% over the past 30 days. Shares of the company have fallen 13.8% in the past year.
Price and Consensus: CPRI
Genesco: This Nashville-based specialty retailer of footwear and accessories is poised to benefit from digital and omnichannel potential, robust full-priced selling, merchandise offerings and cost management. A healthy balance sheet allows Genesco’s to make strategic investments while also returning capital to shareholders.
Remarkably, Genesco’s bottom line has outperformed the Zacks Consensus Estimate in the last four quarters by a wide margin. Meanwhile, the Zacks Consensus Estimate for its current-fiscal EPS has improved by a penny over the past 30 days. Shares of this Zacks Rank #1 company have soared 22.3% in the past year.
Price and Consensus: GCO
Chico's FAS: This Florida-based fashion retailer’s efforts to become a “digital-first, customer-led” company coupled with a strong portfolio of three unique brands, namely, Chico's, WHBM and Soma, position it well to expand customer base and market share. Product enhancement, planned inventories, operating discipline and marketing strategies help drive full-price selling, lower markdowns and produce higher gross margin.
Chico's has a trailing four-quarter earnings surprise of 298.9%, on average. Meanwhile, the Zacks Consensus Estimate for its current-fiscal EPS has risen 14.3% over the past seven days. Markedly, shares of this Zacks Rank #1 company have advanced 32% in the past year.
Price and Consensus: CHS
Tapestry: This provider of luxury accessories and branded lifestyle products has been benefiting from the successful execution of the Acceleration Program. The program aims to transform the company into a leaner and more responsive organization. It intends to build significant data and analytics capabilities, focusing on enhancing digital and omni-channel capabilities and operating with a clearly defined path and strategy for each of its brands, namely, Coach, Kate Spade, and Stuart Weitzman.
Tapestry has a trailing four-quarter earnings surprise of 28.2%, on average. It has an estimated long-term earnings growth rate of 12.5%. The Zacks Consensus Estimate for its current-fiscal EPS has moved up 3.7% in the past 30 days. Notably, shares of this Zacks Rank #2 (Buy) company have declined 25.9% in the past year.
Price and Consensus: TPR