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Zacks Industry Outlook Highlights: The Children's Place, Zumiez, Stitch Fix and The Gap

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For Immediate Release

Chicago, IL – December 16, 2020 – Today, Zacks Equity Research discusses Retail - Apparel, including The Children's Place, Inc. (PLCE - Free Report) , Zumiez Inc. (ZUMZ - Free Report) , Stitch Fix, Inc. (SFIX - Free Report) and The Gap, Inc. (GPS - Free Report) .

Link: https://www.zacks.com/stock/news/1168273/4-apparel-players-well-poised-to-tap-rising-online-demand

In spite of lingering apprehensions associated with the ongoing coronavirus crisis, the Retail - Apparel And Shoes industry has been steadily making its way out of the woods. With the pandemic taking a toll on employment and household income, consumers were left with no option but to curtail on discretionary spending. But things started to look up following measures undertaken to support households coupled with resumption of economic activities.

Players in the industry are leaving no stone unturned to expand customer base and improve top-line performance. Industry participants have been focusing on deepening engagements with consumers, creating innovative and compelling products, and enhancing digital and data analytics capabilities. Clearly, launch of newer styles, customization options and refreshed store environments are likely to boost growth.

With people reluctant to step out of home amid rising coronavirus cases, companies have been focusing on developing their e-commerce operations to adapt to the new normal.

Online Sales Gaining Traction

The Children's Place has been making investments to upgrade its omni-channel capabilities as part of its digital transformation strategy. The company’s $50 million digital transformation investment to enhance omni-channel capabilities in order to meet online demand is reaping benefits. Management on its last earnings call highlighted that since the onset of the pandemic in March, the company has seen its new digital customer count double year over year.

Further, it has converted more than 800,000 of its store-only customers to omni-channel ones. Moreover, the company’s app downloads have risen more than 60%. The company’s digital penetration rose to 44% in the third quarter of fiscal 2020, and represented 55% of total sales.

The company has launched a completely redesigned responsive site and mobile app for The Children's Place and Gymboree brands. It has rolled out "BOPIS" (Buy Online, Pick Up in Store), Save the Sale and Ship from Store. Further, it launched SMS texting capabilities. It has also rolled out “BOSS” (Buy Online, Ship to Store), response to which has been encouraging.

With the changing consumer shopping pattern, this children's specialty apparel retailer has been making efforts to lower dependency on brick-and-mortar platform and shift toward digitization. This Zacks Rank #2 (Buy) company is aiming mall-based brick-and-mortar portfolio to account for less than 25% of revenues entering fiscal 2022. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zumiez is striving to expand its e-commerce and omni-channel platforms to provide consumers with the facility of quick and easy access to its products and brands. In this regard, the company has considerably enhanced customers’ experience by integrating its physical and digital networks.

This enables customers to access inventories through all channels, alongside available facilities like buy online, pick up in store and reserve online and pay in store. We believe that the company’s well-balanced store expansion and e-commerce strategies will help this Zacks Rank #2 company to keep pace with the evolving patterns and drive the top line.

During third-quarter fiscal 2020, this specialty retailer of apparel, footwear and accessories registered net sales growth of 2.6% driven by the continued strength of e-commerce demand. Comparable sales for retail stores locations opened in the third quarter, as well as e-commerce business, increased 8.1%.

By channel, comparable stores sales were up 2.2% and comparable e-commerce sales surged 39.6%. Zumiez highlighted that fourth-quarter e-commerce sales for the 31 days ending Dec 1, 2020 were up about 16.7% year over year. Notably, the company is sharpening its competitive edge by investing in logistics, planning and allocation, and omni-channel capabilities, which position it for growth in the near and the long term.

The well-known online personal styling retailer — Stitch Fix — has been gaining from sturdy growth in its active client base. The company’s prudent measures to boost consumers' shopping experience and enhance assortments have been yielding results. The company started off fiscal 2021 on a solid note as exemplified in its first-quarter results. Both the top and the bottom line surpassed the Zacks Consensus Estimate as well as improved year over year.

A rise in active clients primarily supported top-line growth. Markedly, active clients rose 10% year over year to 3.8 million in the first quarter. Sequentially, the company’s active clients went up by more than 240,000. Management highlighted that this marks the company’s highest sequential client additions.

Management expects to keep witnessing sturdy growth in its active client base and accordingly provided an optimistic top-line view for the second quarter and fiscal 2021. For second-quarter fiscal 2021, management projects revenues to be $506-$515 million, suggesting an improvement of 12-14% year on year. For fiscal 2021, this Zacks Rank #3 (Hold) company anticipates revenues in the band of $2.05-$2.14 billion, which indicates 20-25% growth year over year.

Although the ongoing pandemic has hurt The Gap’s store sales, its online sales have surged meaningfully, courtesy of omni-channel capabilities, including curbside pick-up and ship-from-store. This retailer of clothing, accessories and personal care products has been recording significant growth in its digital business since the onset of the pandemic, driven by a shift in consumer preference toward online shopping. Continued growth in e-commerce business contributed significantly to the company’s consolidated sales during the third quarter of fiscal 2020 as well as gains in its Gap, Old Navy and Athleta brands.

Notably, the online business contributed about 40% of net sales in the third quarter. Notably, its e-commerce business added more than 3.4 million new customers. This represented more than 145% growth in new online customer acquisition year over year. Thereby, e-commerce sales of this Zacks Rank #3 company improved 61% in the reported quarter.

Additionally, management targets to have 50% of sales by the end of 2023 being online. The company intends to make higher investments in digital, technology and distribution capacity to drive online growth. To further bolster digital sales, the company has introduced two new payment options namely PayPal and AfterPay.

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The Gap, Inc. (GPS) - free report >>

Zumiez Inc. (ZUMZ) - free report >>

The Childrens Place, Inc. (PLCE) - free report >>

Stitch Fix, Inc. (SFIX) - free report >>