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5 Textile - Apparel Stocks in Focus on Strong Industry Trends
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Players in the Zacks Textile – Apparel industry are capitalizing on the importance of physical retail. Consumers’ growing inclination toward online shopping has put e-commerce at the forefront for players in the textile-apparel industry.
However, persistent inflationary pressure and supply-chain disruptions have been a concern for several players. Yet, brand enhancement techniques and innovations keep lululemon Athletica Inc. (LULU - Free Report) , PVH Corp. (PVH - Free Report) , Under Armour, Inc. (UAA - Free Report) , Guess?, Inc. (GES - 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 houses 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. 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: Textile-apparel players are capitalizing on the importance of physical retail and the convenience of online engagement. Companies in the space are seeing improved brick-and-mortar sales, driven by rising consumer traffic in stores. These companies are focused on investments to enhance the in-store experience. Consumers’ growing inclination toward online shopping has put e-commerce at the forefront for players in the textile-apparel industry. These firms 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 are gaining traction for many industry players.
Brand-Enhancing Endeavors: Efforts to bolster brands via marketing strategies, licensing deals, buyouts and alliances will likely keep supporting textile-apparel players. New product launches are an essential part of their growth. These companies regularly enhance products through innovation to remain competitive and tap evolving consumer preferences. Textile-apparel players are focused on investments to enhance the in-store experience.
Escalated Costs: Players in the Textile-Apparel space are grappling with input cost inflation, which is exerting pressure on their profits. These companies continue to battle supply-chain hurdles stemming from port congestions, increasing freight prices and wide-scale shortages of materials. Textile-Apparel players have been witnessing higher SG&A costs as well. Elevated marketing expenses and increased investments to enhance store and digital operations have spiked SG&A costs. These factors are a threat to companies’ margins. Moreover, the impact of lower demand due to inflation, rising interest rates and reduced discretionary spending is a significant concern for the payers.
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 #88, which places it in the top 35% 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 outperform the bottom 50% by a factor of more than 2 to 1.
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 declined 3.2% during this period against the broader sector’s growth of 5.7%. The S&P 500 has rallied 14.4% 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 12.52X compared with the S&P 500’s 19.06X and the sector’s 16.46X.
Over the last five years, the industry has traded as high as 29.58X, as low as 9.73X and at the median of 16.57X, as the chart below shows.
Price-to-Earnings Ratio (Past 5 Years)
5 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. G-III Apparel is reaping benefits of favorable trends and momentum in the wholesale market. Solid gains from its brands and digital business have been driving the company’s performance. Management 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 seethe complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for GIII’s current fiscal year earnings per share (EPS) remained unchanged in the past 30 days at $3.27. Shares of G-III Apparel have gained 33.2% in the past year.
Price and Consensus: GIII
lululemon: The yoga-inspired athletic apparel company carries a Zacks Rank #2 (Buy). lululemon has been benefiting from continued business momentum and innovative products. It is capitalizing on the importance of physical retail and the convenience of online engagement. LULU’s Power of Three ×2 growth strategy based on three key growth drivers — product innovation, guest experience and market expansion — holds promise.
The Zacks Consensus Estimate for lululemon’s current fiscal year EPS has remained unchanged in the past 30 days to $12.13. LULU’s stock has increased 22% in the past year.
Price and Consensus: LULU
PVH Corp.: This designer, marketer and retailer of men's, women's, and children's apparel and accessories has gained 39.3% in a year. PVH Corp’s diversified brand portfolio allows it to stay ahead of its peers to generate above-average industry growth and sustain its position. PVH has been on track with expanding its direct-to-consumer digital business and strengthening its network with third-party digital partners. The Zacks Rank #2 company’s multi-year strategy, PVH+ Plan, holds promise.
The Zacks Consensus Estimate for PVH’s current fiscal-year EPS has moved up by a penny in the past 30 days to $10.34.
Price and Consensus: PVH
Guess?: The Zacks Rank #3 (Hold) company designs, markets, distributes and licenses lifestyle collections of apparel and accessories. Guess? is progressing with its customer-centric initiatives, including omnichannel capabilities, advanced data analytics and customer segmentation. Management is committed to its six key strategies and has made remarkable progress against each of them. Strength in its online business remains a key driver.
The Zacks Consensus Estimate for Guess?’s current fiscal-year EPS has remained unchanged in the past 30 days at $3.01. GES’s stock has gained 26.6% in the past year.
Price and Consensus: GES
Under Armour: The Zacks Rank #3 company is progressing well with its multi-year transformation plan. Under Armour’s focus on strengthening its brand through enhanced customer connections, effective innovations, better price points and a new loyalty program are yielding. The company’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 current fiscal year EPS has remained unchanged at 49 cents in the past 30 days. Shares of the company have declined 16.6% in the past year.
Price and Consensus: UAA
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5 Textile - Apparel Stocks in Focus on Strong Industry Trends
Players in the Zacks Textile – Apparel industry are capitalizing on the importance of physical retail. Consumers’ growing inclination toward online shopping has put e-commerce at the forefront for players in the textile-apparel industry.
However, persistent inflationary pressure and supply-chain disruptions have been a concern for several players. Yet, brand enhancement techniques and innovations keep lululemon Athletica Inc. (LULU - Free Report) , PVH Corp. (PVH - Free Report) , Under Armour, Inc. (UAA - Free Report) , Guess?, Inc. (GES - 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 houses 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. 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: Textile-apparel players are capitalizing on the importance of physical retail and the convenience of online engagement. Companies in the space are seeing improved brick-and-mortar sales, driven by rising consumer traffic in stores. These companies are focused on investments to enhance the in-store experience. Consumers’ growing inclination toward online shopping has put e-commerce at the forefront for players in the textile-apparel industry. These firms 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 are gaining traction for many industry players.
Brand-Enhancing Endeavors: Efforts to bolster brands via marketing strategies, licensing deals, buyouts and alliances will likely keep supporting textile-apparel players. New product launches are an essential part of their growth. These companies regularly enhance products through innovation to remain competitive and tap evolving consumer preferences. Textile-apparel players are focused on investments to enhance the in-store experience.
Escalated Costs: Players in the Textile-Apparel space are grappling with input cost inflation, which is exerting pressure on their profits. These companies continue to battle supply-chain hurdles stemming from port congestions, increasing freight prices and wide-scale shortages of materials. Textile-Apparel players have been witnessing higher SG&A costs as well. Elevated marketing expenses and increased investments to enhance store and digital operations have spiked SG&A costs. These factors are a threat to companies’ margins. Moreover, the impact of lower demand due to inflation, rising interest rates and reduced discretionary spending is a significant concern for the payers.
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 #88, which places it in the top 35% 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 outperform the bottom 50% by a factor of more than 2 to 1.
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 declined 3.2% during this period against the broader sector’s growth of 5.7%. The S&P 500 has rallied 14.4% 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 12.52X compared with the S&P 500’s 19.06X and the sector’s 16.46X.
Over the last five years, the industry has traded as high as 29.58X, as low as 9.73X and at the median of 16.57X, as the chart below shows.
Price-to-Earnings Ratio (Past 5 Years)
5 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. G-III Apparel is reaping benefits of favorable trends and momentum in the wholesale market. Solid gains from its brands and digital business have been driving the company’s performance. Management 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) remained unchanged in the past 30 days at $3.27. Shares of G-III Apparel have gained 33.2% in the past year.
Price and Consensus: GIII
lululemon: The yoga-inspired athletic apparel company carries a Zacks Rank #2 (Buy). lululemon has been benefiting from continued business momentum and innovative products. It is capitalizing on the importance of physical retail and the convenience of online engagement. LULU’s Power of Three ×2 growth strategy based on three key growth drivers — product innovation, guest experience and market expansion — holds promise.
The Zacks Consensus Estimate for lululemon’s current fiscal year EPS has remained unchanged in the past 30 days to $12.13. LULU’s stock has increased 22% in the past year.
Price and Consensus: LULU
PVH Corp.: This designer, marketer and retailer of men's, women's, and children's apparel and accessories has gained 39.3% in a year. PVH Corp’s diversified brand portfolio allows it to stay ahead of its peers to generate above-average industry growth and sustain its position. PVH has been on track with expanding its direct-to-consumer digital business and strengthening its network with third-party digital partners. The Zacks Rank #2 company’s multi-year strategy, PVH+ Plan, holds promise.
The Zacks Consensus Estimate for PVH’s current fiscal-year EPS has moved up by a penny in the past 30 days to $10.34.
Price and Consensus: PVH
Guess?: The Zacks Rank #3 (Hold) company designs, markets, distributes and licenses lifestyle collections of apparel and accessories. Guess? is progressing with its customer-centric initiatives, including omnichannel capabilities, advanced data analytics and customer segmentation. Management is committed to its six key strategies and has made remarkable progress against each of them. Strength in its online business remains a key driver.
The Zacks Consensus Estimate for Guess?’s current fiscal-year EPS has remained unchanged in the past 30 days at $3.01. GES’s stock has gained 26.6% in the past year.
Price and Consensus: GES
Under Armour: The Zacks Rank #3 company is progressing well with its multi-year transformation plan. Under Armour’s focus on strengthening its brand through enhanced customer connections, effective innovations, better price points and a new loyalty program are yielding. The company’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 current fiscal year EPS has remained unchanged at 49 cents in the past 30 days. Shares of the company have declined 16.6% in the past year.
Price and Consensus: UAA