Back to top

Image: Shutterstock

Apparel Sales Continue to Soar: 4 Solid Stocks to Buy

Read MoreHide Full Article

Retail sales slowed in March, but that hasn’t impacted the apparel market, which has been on a high for a while. As businesses, factories and schools get back to operating at the optimum level, people have once again started stepping out of their homes, creating a steady rise in demand for new clothes.

Also, in-store shopping for apparel is once again picking up after the segment witnessed solid online sales over the past couple of years. This has been helping stocks like Nordstrom, Inc. (JWN - Free Report) , Chico's FAS, Inc. (CHS - Free Report) , The Buckle, Inc. (BKE - Free Report) and J.Jill, Inc. (JILL - Free Report) .

Apparel Sales Rise

According to data from the National Retail Federation (NRF) and the Commerce Department released last week, retail sales grew 0.5% in March. Retail sales have somewhat slowed owing to rising costs. However, the apparel segment seems to be a bright spot, with sales soaring steadily.

Apparel sales rose 2.6% in March on a month-over-month basis. On a year-over-year basis, apparel sales jumped 7.5%. People have lately started spending more on services once again but that hasn’t impacted demand and sales of goods.

A major reason favoring the steady growth of apparel sales is the reopening of the economy. The COVID-19 outbreak led to working and learning from home. This had directly hit sales of new clothes and accessories.

However, things started changing with the economic reopening. Moreover, schools and offices started reopening to full strength with the turn of this year.

Apparel Market on Solid Ground 

People now want to give their wardrobe a makeover after cutting down on apparel shopping for almost two years. Travel too has increased, and people are planning vacations. This has created a new boom in demand for clothing and accessories, improving sales.

A separate report from Mastercard SpendingPulse also shows a solid surge in apparel sales. According to the report, apparel sales grew 16% in March on a year-over-year basis. Interestingly, the surge comes despite a rise in prices. Skyrocketing prices have become a major concern lately. Data released last week shows inflation at a 41-year high.

This compelled the Fed to increase interest rates by 25 basis points in March, and there are indications of steeper rate hikes in the coming months. Even then, people are aggressively shopping for new clothes, which is a good sign.

The apparel business is likely to grow this year as the economy improves. According to the NPD Group, the clothing market is on track to surpass pre-pandemic sales levels this year.

In addition, personal income is increasing, as is spending. In February, personal spending in the United States increased by 2%. Furthermore, hiring is on the rise, and unemployment is at an all-time low. As a result, with more money in hand, spending should only rise in the near term, which will benefit the garment sector.

Our Choices

Given this scenario, it would be wise to invest in these four 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.

Nordstrom, Inc. is a leading fashion specialty retailer in the United States. JWN offers an extensive selection of both branded and private-label merchandise, which are positioned in the upscale segment of the industry. Nordstrom offers high-quality apparel, shoes, cosmetics and related accessories for men, women, young adults and children through a variety of channels.

Nordstrom’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 67.5% over the past 60 days. JWN sports a Zacks Rank #1.

Chico's FAS, Inc. is a cultivator of brands serving the lifestyle needs of fashion-savvy women 30 years and older. CHS’ brand portfolio currently consists of three brands: Chico's, White House Black Market and Soma. Chico's FAS’ brands are all specialty retailers of private label women's apparel, accessories and related products.

Chico's FAS’ expected earnings growth rate for the current year is 15%. The Zacks Consensus Estimate for current-year earnings has improved 9.5% over the past 60 days. CHS has a Zacks Rank #2.

The Buckle, Inc. is a leading retailer of medium to better-priced casual apparel, footwear, and accessories for fashion-conscious young men and women. BKE markets a wide selection of brand names and private label casual apparel, including denims, other casual bottoms, tops, sportswear, outerwear, accessories and footwear. Buckle emphasizes personalized attention to its guests (customers) and provides individual customer services such as free alterations, layaways, and a frequent shopper program.

Buckle’s expected earnings growth rate for the current year is 1.8%. The Zacks Consensus Estimate for current-year earnings has improved 10.3% over the past 60 days. BKE sports a Zacks Rank #1.

J.Jill, Inc.operates as a specialty retailer of women’s apparel. JILL offers sweaters, tops, pants, dresses, shorts, skirts, sleepwear and accessories. J. Jill markets through retail stores, website and catalog.

J.Jill’s expected earnings growth rate for the current year is 5.2%. The Zacks Consensus Estimate for current-year earnings has improved 24.4% over the past 60 days. JILL has a Zacks Rank #1.