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Watch These 4 Textile - Apparel Stocks Amid Industry Challenges
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Players in the Zacks Textile - Apparel industry are battling cost inflation stemming from supply-chain challenges. Escalated SG&A expenses are also hurting many companies in the space. Additionally, reduced discretionary spending due to an overall inflationary landscape has been a concern.
However, efforts to bolster store and digital operations, together with efficient brand enhancement endeavors, keep lululemon Athletica Inc. (LULU - Free Report) , Ralph Lauren Corporation (RL - Free Report) , Crocs, Inc. (CROX - Free Report) and G-III Apparel Group, Ltd. (GIII - Free Report) well-positioned.
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, to name a few. 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.
4 Trends Shaping the Future of the Textile - Apparel Industry
Escalated Costs: Several industry players are bearing the brunt of input cost inflation. Companies have been grappling with supply-chain hurdles stemming from prolonged COVID-19-associated factors, congestion at ports and reduced airfreight capacity. These supply-chain issues are inducing delays and resulting in increased freight costs. Textile-apparel players have been witnessing higher SG&A costs as well. Elevated marketing expenses and increased investments toward enhancing store and digital operations have been spiking up SG&A costs. These factors pose threats to companies’ margins. Moreover, the impact of lower demand due to inflation and reduced discretionary spending is a major concern for the payers.
International Exposure Poses Risks: Due to a vast international presence, textile-apparel companies are exposed to volatile foreign currency movements. Political unrest, like turmoil related to the current geopolitical events and related sanctions, restrictions or other responses, could also dent companies’ performance.
Improved Store Traffic, Solid Digital Trends:Textile-apparel players are capitalizing on the importance of physical retail and the convenience of online engagement. Companies are focused on investments in enhancing the in-store experience. Meanwhile, consumers’ growing inclination toward online shopping has put e-commerce at the forefront for players in the textile-apparel industry. Companies in the space 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 are gaining traction for many industry players.
Brand-Enhancing Endeavors: Efforts to bolster brands via marketing strategies, licensing deals, buyouts and alliances are likely to keep supporting textile-apparel players. New product launches are also an important part of their growth. Companies in the space regularly enhance products through innovation to remain competitive and tap evolving consumer preferences. The pandemic pushed the comfortable leisurewear category, which has been working in favor of activewear providers.
Zacks Industry Rank Indicates Drab Prospects
The Zacks Textile – Apparel industry is housed within the broader Zacks Consumer Discretionary sector. The industry currently carries a Zacks Industry Rank #185, which places it in the bottom 26% 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 dim 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 bottom 50% of the Zacks-ranked industries results from a negative aggregate earnings outlook for the constituent companies. Looking at the aggregate earnings estimate revisions, analysts are gradually becoming less confident about this group’s earnings growth potential. Since the beginning of February 2023, the industry’s earnings estimate for the current financial year has fallen 6.7%.
Let’s look at the industry’s performance and current valuation.
Industry vs. Broader Market
The Zacks Textile - Apparel industry has underperformed the broader Zacks Consumer Discretionary sector as well as the S&P 500 composite in the past year.
The industry has risen 2.7% during this period compared with the broader sector’s growth of 7.9%. Meanwhile, the S&P 500 has rallied 14.9% in the same period.
One-Year Price Performance
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 11.37X compared with the S&P 500’s 19.04X and the sector’s 17.95X.
Over the last five years, the industry has traded as high as 32.28X, as low as 9.75X and at the median of 18.03X, as the chart below shows.
Price-to-Earnings Ratio (Past 5 Years)
4 Textile - Apparel Stocks to Keep a Close Eye On
G-III Apparel: This Zacks Rank #1 (Strong Buy) company designs, sources and markets women's and men's apparel. G-III Apparel’s digital business has been robust for a while now. You can see the complete list of today’s Zacks #1 Rank stocks here.
The company has been expanding in digital, increasing total sales by about 15% in fiscal 2023. Further, G-III Apparel undertakes several strategies, including acquisitions and the licensing of well-known brands, to expand the product portfolio and make itself a diversified apparel and accessories company.
The Zacks Consensus Estimate for GIII’s current fiscal-year earnings per share (EPS) has improved from $2.61 to $2.79 over the past 30 days to $8.27. Shares of G-III Apparel have soared 41.6% in the past six months. The company has an expected EPS growth rate of 15% for three to five years.
Price and Consensus: GIII
Crocs: The designer, developer, manufacturer, marketer and distributor of casual lifestyle footwear and accessories currently carries a Zacks Rank #2 (Buy). Crocs has been gaining from solid consumer demand for its new clog and sandal introductions, as well as continued momentum in the HEYDUDE brand. CROX is making significant progress in expanding digital and omnichannel capabilities. A focus on product innovation and marketing is also an upside for the company.
The Zacks Consensus Estimate for Crocs’ current fiscal-year EPS has climbed 3.1% in the past 60 days to $11.19. Crocs stock has rallied 21.7% in the past six months. CROX has a long-term earnings growth rate of 15%.
Price and Consensus: CROX
Ralph Lauren: The designer, marketer and distributor of premium lifestyle products is making significant progress in expanding digital and omnichannel capabilities through investments in mobile, omnichannel and fulfillment. The Zacks Rank #3 (Hold) company continues to scale and expand its connected retail capabilities, including virtual selling appointments, “buy online, pick up in store”, endless aisle product availability and more. Ralph Lauren has been on track with its Next Great Chapter: Accelerate plan.
The Zacks Consensus Estimate for Ralph Lauren’s current fiscal-year EPS has moved up by 1.2% over the past 30 days to $9.36. Shares of RL have jumped 5.6% in the past six months. Ralph Lauren has an expected EPS growth rate of 13.8% for three to five years.
Price and Consensus: RL
lululemon: The yoga-inspired athletic apparel company is gaining from robust traffic trends in both stores and e-commerce, driven by a favorable response to its products. lululemon continues to capture growing online demand and ensures a robust shopping experience through its accelerated e-commerce investments. LULU’s Power of Three ×2 growth strategy based on three key growth drivers, including product innovation, guest experience and market expansion, is impressive.
The Zacks Consensus Estimate for lululemon’s current fiscal year EPS has risen from $11.48 to $11.89 over the past 30 days. LULU’s stock has jumped 10.5% in the past six months. This Zacks Rank #3 company has an expected EPS growth rate of 20% for three to five years.
Price and Consensus: LULU
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Watch These 4 Textile - Apparel Stocks Amid Industry Challenges
Players in the Zacks Textile - Apparel industry are battling cost inflation stemming from supply-chain challenges. Escalated SG&A expenses are also hurting many companies in the space. Additionally, reduced discretionary spending due to an overall inflationary landscape has been a concern.
However, efforts to bolster store and digital operations, together with efficient brand enhancement endeavors, keep lululemon Athletica Inc. (LULU - Free Report) , Ralph Lauren Corporation (RL - Free Report) , Crocs, Inc. (CROX - Free Report) and G-III Apparel Group, Ltd. (GIII - Free Report) well-positioned.
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, to name a few. 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.
4 Trends Shaping the Future of the Textile - Apparel Industry
Escalated Costs: Several industry players are bearing the brunt of input cost inflation. Companies have been grappling with supply-chain hurdles stemming from prolonged COVID-19-associated factors, congestion at ports and reduced airfreight capacity. These supply-chain issues are inducing delays and resulting in increased freight costs. Textile-apparel players have been witnessing higher SG&A costs as well. Elevated marketing expenses and increased investments toward enhancing store and digital operations have been spiking up SG&A costs. These factors pose threats to companies’ margins. Moreover, the impact of lower demand due to inflation and reduced discretionary spending is a major concern for the payers.
International Exposure Poses Risks: Due to a vast international presence, textile-apparel companies are exposed to volatile foreign currency movements. Political unrest, like turmoil related to the current geopolitical events and related sanctions, restrictions or other responses, could also dent companies’ performance.
Improved Store Traffic, Solid Digital Trends: Textile-apparel players are capitalizing on the importance of physical retail and the convenience of online engagement. Companies are focused on investments in enhancing the in-store experience. Meanwhile, consumers’ growing inclination toward online shopping has put e-commerce at the forefront for players in the textile-apparel industry. Companies in the space 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 are gaining traction for many industry players.
Brand-Enhancing Endeavors: Efforts to bolster brands via marketing strategies, licensing deals, buyouts and alliances are likely to keep supporting textile-apparel players. New product launches are also an important part of their growth. Companies in the space regularly enhance products through innovation to remain competitive and tap evolving consumer preferences. The pandemic pushed the comfortable leisurewear category, which has been working in favor of activewear providers.
Zacks Industry Rank Indicates Drab Prospects
The Zacks Textile – Apparel industry is housed within the broader Zacks Consumer Discretionary sector. The industry currently carries a Zacks Industry Rank #185, which places it in the bottom 26% 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 dim 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 bottom 50% of the Zacks-ranked industries results from a negative aggregate earnings outlook for the constituent companies. Looking at the aggregate earnings estimate revisions, analysts are gradually becoming less confident about this group’s earnings growth potential. Since the beginning of February 2023, the industry’s earnings estimate for the current financial year has fallen 6.7%.
Let’s look at the industry’s performance and current valuation.
Industry vs. Broader Market
The Zacks Textile - Apparel industry has underperformed the broader Zacks Consumer Discretionary sector as well as the S&P 500 composite in the past year.
The industry has risen 2.7% during this period compared with the broader sector’s growth of 7.9%. Meanwhile, the S&P 500 has rallied 14.9% in the same period.
One-Year Price Performance
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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 11.37X compared with the S&P 500’s 19.04X and the sector’s 17.95X.
Over the last five years, the industry has traded as high as 32.28X, as low as 9.75X and at the median of 18.03X, as the chart below shows.
Price-to-Earnings Ratio (Past 5 Years)
.jpg)
4 Textile - Apparel Stocks to Keep a Close Eye On
G-III Apparel: This Zacks Rank #1 (Strong Buy) company designs, sources and markets women's and men's apparel. G-III Apparel’s digital business has been robust for a while now. You can see the complete list of today’s Zacks #1 Rank stocks here.
The company has been expanding in digital, increasing total sales by about 15% in fiscal 2023. Further, G-III Apparel undertakes several strategies, including acquisitions and the licensing of well-known brands, to expand the product portfolio and make itself a diversified apparel and accessories company.
The Zacks Consensus Estimate for GIII’s current fiscal-year earnings per share (EPS) has improved from $2.61 to $2.79 over the past 30 days to $8.27. Shares of G-III Apparel have soared 41.6% in the past six months. The company has an expected EPS growth rate of 15% for three to five years.
Price and Consensus: GIII
Crocs: The designer, developer, manufacturer, marketer and distributor of casual lifestyle footwear and accessories currently carries a Zacks Rank #2 (Buy). Crocs has been gaining from solid consumer demand for its new clog and sandal introductions, as well as continued momentum in the HEYDUDE brand. CROX is making significant progress in expanding digital and omnichannel capabilities. A focus on product innovation and marketing is also an upside for the company.
The Zacks Consensus Estimate for Crocs’ current fiscal-year EPS has climbed 3.1% in the past 60 days to $11.19. Crocs stock has rallied 21.7% in the past six months. CROX has a long-term earnings growth rate of 15%.
Price and Consensus: CROX
Ralph Lauren: The designer, marketer and distributor of premium lifestyle products is making significant progress in expanding digital and omnichannel capabilities through investments in mobile, omnichannel and fulfillment. The Zacks Rank #3 (Hold) company continues to scale and expand its connected retail capabilities, including virtual selling appointments, “buy online, pick up in store”, endless aisle product availability and more. Ralph Lauren has been on track with its Next Great Chapter: Accelerate plan.
The Zacks Consensus Estimate for Ralph Lauren’s current fiscal-year EPS has moved up by 1.2% over the past 30 days to $9.36. Shares of RL have jumped 5.6% in the past six months. Ralph Lauren has an expected EPS growth rate of 13.8% for three to five years.
Price and Consensus: RL
lululemon: The yoga-inspired athletic apparel company is gaining from robust traffic trends in both stores and e-commerce, driven by a favorable response to its products. lululemon continues to capture growing online demand and ensures a robust shopping experience through its accelerated e-commerce investments. LULU’s Power of Three ×2 growth strategy based on three key growth drivers, including product innovation, guest experience and market expansion, is impressive.
The Zacks Consensus Estimate for lululemon’s current fiscal year EPS has risen from $11.48 to $11.89 over the past 30 days. LULU’s stock has jumped 10.5% in the past six months. This Zacks Rank #3 company has an expected EPS growth rate of 20% for three to five years.
Price and Consensus: LULU
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