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Back-to-School Season to Boost Apparel Sales: 5 Winners

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The retail sector has been one of the worst casualties of the pandemic, with clothing and apparel sales taking a bad hit as most people stayed home and spent more on necessities. However, the apparel market started showing signs of recovery as the economy reopened and restrictions slowly got lifted.

Finally, it seems that apparel sales are back on track, as restrictions further ease and people get ready to head out for holidays. Also, the back-to-school season is approaching and sales are likely to get a boost.

Apparel Sales Rebounding

After suffering for months, the clothing and apparel market is finally showing signs of recovery with sales picking up. Although retail sales unexpectedly declined in May, apparel sales came up with an impressive show. According to the latest Commerce Department report, sales at clothing and clothing accessories stores soared 200.3% in May on a year-over-year basis. On a month-over-month basis, sales rose 3% in May.

Last year, sales hit a rock bottom as the pandemic compelled retailers to shutter their stores. Although e-commerce had been somewhat helping the retail sector, people spent mainly on essential goods, which saw apparel sales further decline. However, things started changing from the beginning of the year, thanks to the new round of stimulus which has given people more spending power.

Clothing Sales Poised to Grow

The massive vaccination drive has seen people get back their due confidence to step out of their homes. This has resulted in the government easing restrictions and people are now planning holidays and going back. Also, schools are reopening and parents are more confident about sending their children to schools this time around. This may prove to be yet again a great back-to-school season for apparel retailers.

According to the latest Mastercard SpendingPulse, apparel sales during the back-to-school season are projected to jump 78.2% on a year-over-year basis. The back-to-school season is typically considered the period between Jul 15 and Sep 6.

This period put up a no-show last year as schools remained closed due to the pandemic, thus badly hitting not only apparel but the overall retail sector. Much like the holiday season, back-to-school is considered an important sales period for retailers. The back-to-school season is projected to boost overall retail sales by 5.5% this year from 2020 and 6.7% from 2019.

The industry is going to be further benefited in the coming days as restrictions are further eased. This will give people more confidence as they step out of their homes. Also, after a year of almost no outdoor activity, many are likely to plan trips and holidays, which will require them to buy clothes.

Our Choices

Given this scenario, it would be prudent to invest in these five apparel stocks. Each of the stocks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Abercrombie & Fitch Company (ANF - Free Report) operates as a specialty retailer of premium, high-quality casual apparel for men, women and kids through a network of approximately 850 stores across North America, Europe, Asia and the Middle East.

The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 88.1% over the past 30 days. The company sports a Zacks Rank #1.

Buckle, Inc. The (BKE - Free Report) markets a wide selection of brand names and private label casual apparel, including denim, other casual bottoms, tops, sportswear, outerwear, accessories and footwear. 

The company’s expected earnings growth rate for the current year is 41%. The Zacks Consensus Estimate for current-year earnings has improved 25% over the past 30 days. The company sports a Zacks Rank #1.

L Brands, Inc. (LB - Free Report) evolved from an apparel-based specialty retailer to a segment leader focused on women’s intimate and other apparel, personal care, beauty and home fragrance products. 

The company’s expected earnings growth rate for the current year is 67.3%. The Zacks Consensus Estimate for current-year earnings has improved 6.6% over the past 30 days. L Brands has a Zacks Rank #2.

Urban Outfitters, Inc. (URBN - Free Report) is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home décor and gift products. 

The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 29% over the past 30 days. Urban Outfitters carries a Zacks Rank #1

The Childrens Place, Inc. (PLCE - Free Report) sells apparel, footwear, accessories and other items for children; and designs, contracts to manufacture, and sells merchandise under the brand names “The Children’s Place”, “Place”, “Baby Place” and “Gymboree.”

The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 58.2% over the past 30 days. The Children’s Place carries a Zacks Rank #1.

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