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Digitization Holds the Key: 4 Apparel Players to Watch Out For

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The pandemic has reshaped almost every other sector prompting them to rewrite the rules of game and transforming the business processes. Evidently, Retail - Apparel And Shoes industry has not been an exception. While inventory management, supply chain enhancement and cost structure realignment have been part & parcel of business strategies, investment to accelerate digitization has now become paramount. Without doubt, the pandemic has rapidly changed the convenience of digitization into a necessity.

Industry participants have been emphasizing on membership programs, upgradation of store technology and omni-channel capabilities, shopping via mobile app, last mile delivery solutions, and forming alliance with digitally native retailers.

Players in the industry have been aggressively adopting strategies and making planned investments to cater to customer demand be it in store or online. Undeniably, expedited delivery services like doorstep delivery, curbside pickup or buy online and pick up at store as well as contactless payment gateway will continue to play a crucial role in maximizing share of customers’ wallet. Industry experts cited that companies also need to rework on assortments to meet emerging trends in the post-pandemic world, including a more customized approach.

Well, as Americans look to refresh their wardrobes, thanks to the resumption of active social lifestyle, events and occasions, apparel companies need to increase product visibility on online platforms, enhance customer engagement on social channels and make logistical improvements. More than a year now since the pandemic had struck the economy, we believe that online shopping is here to stay even after the risk of infection subsides owing to safety and convenience.

Check out These Four Apparel Players

The Children's Place, Inc. (PLCE - Free Report) has been making investments to upgrade its omni-channel capabilities as part of digital transformation strategy. The company’s $50 million digital transformation investment in order to meet online demand is reaping benefits. Markedly, the company has one of the highest digital penetrations in the industry. We note that the company’s consolidated digital sales surged 37% during first-quarter fiscal 2021, representing 42% of total sales. Digital sales rose 35% in the United States and 82% in Canada. The expansion of digital business coupled with the significant sales transfer rate that the company is attaining owing to the strategic decision to shutter 300 stores is resulting in long-term steady state annual digital penetration of 50%. This pure-play children’s specialty apparel retailer has been making efforts to lower dependency on brick-and-mortar platform and shift toward digitization. This Zacks Rank #1 (Strong 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 stocks here.

Abercrombie & Fitch Co. (ANF - Free Report) has been making significant progress in expanding digital and omni-channel capabilities to better engage with consumers. The company’s strong digital momentum continued in first-quarter fiscal 2021, which boosted the top line. Digital net sales advanced 45% year over year, contributing about 52% of total sales. The digital business mainly benefited from the addition of new customers in the channel, backed by robust digital marketing efforts. Also, high customer retention and spend per customer aided sales growth. The company remains encouraged with its strong online presence and expects to keep gaining from this platform. This Zacks Rank #1 company plans to continue investing toward bolstering omni-channel capabilities including curbside pickup and ship from store services. For fiscal 2021, the company expects capital expenditure of $100 million. Roughly 50% of the capital spending is expected to be used for investments in digital and technology.

 

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The Gap, Inc.’s (GPS - Free Report) online sales have been increasing, courtesy of omni-channel capabilities, including curbside pick-up and ship-from-store. The company continued to witness strength in the online business during the first quarter of fiscal 2021 with digital sales increasing 61% from first-quarter fiscal 2020 and 82% from first-quarter fiscal 2019. Notably, digital business contributed 40% of total sales in the quarter under review. Continued growth in e-commerce business contributed significantly to the company’s consolidated sales as well as gains in its Gap, Old Navy and Athleta brands. Going ahead, management remains keen on optimizing mobile experience as a key priority in fiscal 2021. The company launched its native Android app in March, which is gaining traction. Moreover, alternative payment options namely, PayPal and AfterPay, represented 20% of online spend during the first quarter. This retailer of clothing, accessories and personal care products registered more than 60% jump in new online customers acquired versus last year. This Zacks Rank #3 (Hold) company now envisions fiscal 2021 net sales growth in the low-to-mid twenty percent range compared with prior projection of mid-to-high teens increase.

American Eagle Outfitters, Inc. (AEO - Free Report) has been witnessing strong digital demand on the shift in consumers’ shopping preference. Investments made in digital platform, omni-channel capabilities and supply chain have been aiding in meeting customers’ demand more effectively. This specialty retailer of on-trend clothing, accessories, and personal care products saw its first-quarter fiscal 2021 digital revenues rising 57% from first-quarter fiscal 2019 levels. Notably, online sales across the Aerie and AE brands were up 158% and 20%, respectively. Overall, online sales contributed nearly 40% to the company’s revenues in the first quarter. Markedly, this Zacks Rank #3 has been enhancing curbside and in-store pickup features. Its improved mobile experience and redesigned app, resulted in 70% surge in revenues from total mobile.

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