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Zacks Industry Outlook Highlights Lululemon, Ralph Lauren, PVH and Guess?

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For Immediate Release

Chicago, IL – May 7, 2024 – Today, Zacks Equity Research discusses Lululemon Athletica Inc. (LULU - Free Report) , Ralph Lauren Corp. (RL - Free Report) , PVH Corp. (PVH - Free Report) and Guess?, Inc. (GES - Free Report) .

Industry: Apparel


Persistent inflationary pressures and disruptions in the supply chain are persistent challenges for many players within the Zacks Textile - Apparel industry. Additionally, heightened SG&A expenses are impacting profitability across the sector.

Despite these challenges, Lululemon Athletica Inc., Ralph Lauren Corp., PVH Corp. and Guess?, Inc. are strategically positioned for growth due to their efforts to enhance physical and digital operations coupled with strong brand development initiatives.

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 also comprises companies offering apparel for a healthy lifestyle and athletic activities, such as yoga, running and training.

Some companies also deal with fitness-related accessories like gloves, bags, headwear and sports masks. The 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.

4 Trends Shaping the Future of the Textile - Apparel Industry

Cost Concerns: Textile-apparel companies are grappling with input cost inflation, persistently impacting their bottom line. Many firms are vulnerable to shipping disruptions, which can result in delays and higher freight expenses. These businesses are experiencing increased SG&A costs, driven by elevated marketing spending and investments in improving physical and digital retail operations. The impact of lower demand stemming from inflation and reduced discretionary spending is adding to the pressure. The tough and competitive labor market is an additional concern, all of which threaten companies' profit margins.

International Risk Factors: Textile-apparel companies face potential risks due to their global footprint, including exposure to adverse foreign currency fluctuations. Political unrest, like turmoil related to current geopolitical events and the related sanctions, restrictions or other responses, might adversely impact the performance of these companies.

Improved Store Traffic, Solid Digital Trends: As consumers seamlessly transition between physical and digital platforms, Textile-apparel companies are enhancing guest experiences across all touchpoints. These participants are prioritizing investments to elevate in-store interactions. Brick-and-mortar sales have been rising, fueled by increased foot traffic.

The growing preference for online shopping convenience propelled e-commerce to the forefront for Textile-apparel players. These companies have long been committed to enhancing e-commerce platforms, improving mobile applications, upgrading payment systems, integrating online and offline operations and expanding fulfillment capabilities. Options like buy online, pickup in-store and curbside delivery are gaining popularity among industry players.

Brand-Enhancing Endeavors: Textile-apparel companies have been benefiting from endeavors aimed at enhancing their brands through various marketing strategies, licensing agreements, acquisitions and partnerships. Introducing new products remains integral to these companies’ growth strategies. Constant innovation in product offerings is a key aspect of remaining competitive and catering to changing consumer demands.

Zacks Industry Rank Indicates Dull Prospects

The Zacks Textile – Apparel industry is housed within the broader Zacks Consumer Discretionary sector. The industry currently carries a Zacks Industry Rank #224, which places it in the bottom 11% 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.

The industry’s position in the bottom 50% of the Zacks-ranked industries results from a negative aggregate earnings outlook for the constituent companies. Since the beginning of January 2024, the industry’s consensus earnings estimate for the current financial year has dropped 5.6%.

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 and the S&P 500 composite in the past year.

The industry has declined 5.3% during this period against the broader sector’s growth of 3.3%. Meanwhile, the S&P 500 has rallied 24.8% in the same period.

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 11.98X compared with the S&P 500’s 20.61X and the sector’s 16.67X.

Over the last five years, the industry traded as high as 29.58X, as low as 9.73X and at the median of 15.59X.

4 Textile - Apparel Stocks to Keep a Close Eye On

lululemon: The yoga-inspired athletic apparel company currently carries a Zacks Rank #3 (Hold). LULU is leveraging physical retail and online engagement to its advantage. The company has been benefiting from implementing its Power of Three X2 growth strategy, emphasizing product innovation, guest experience and market expansion. lululemon adeptly navigates market changes and enhances profitability through optimized cost structures. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for lululemon’s current fiscal year earnings per share (EPS) has moved down by a penny in the past 30 days to $14.15. The LULU stock has dropped 6.9% in the past year.

Ralph Lauren: The Zacks Rank #3 company is a major designer, marketer and distributor of premium lifestyle products. Ralph Lauren is advancing its digital and omnichannel capabilities through strategic investments in mobile technology, omnichannel integration, and fulfillment services. RL is creating a simplified global organizational structure and rolling out improved technological capabilities as part of its Next Great Chapter plan.

The Zacks Consensus Estimate for Ralph Lauren’s current fiscal-year EPS has remained unchanged in the past 30 days at $10.23. RL’s shares have surged 49.2% in the past six months.

PVH Corp: This designer, marketer and retailer of men's, women's and children's apparel and accessories has a Zacks Rank #3. The company’s diversified brand portfolio allows it to stay ahead of its peers to generate above-average industry growth. PVH Corp's effective implementation of the PVH+ Plan is promising. The company prioritizes digital expansion through a comprehensive distribution strategy. With a strong portfolio, particularly Tommy Hilfiger and promising distribution opportunities, PVH Corp is primed for sustained long-term growth.

The Zacks Consensus Estimate for PVH’s current fiscal-year EPS has moved down by a penny in the past seven days to $10.92. PVH Corp’s shares have rallied 36.9% in the past six months.

Guess?: The company designs, markets, distributes and licenses lifestyle collections of apparel and accessories. The company is progressing with its customer-centric initiatives, including omnichannel capabilities, advanced data analytics and customer segmentation. GES is reaping benefits from solid brand momentum worldwide, with customers responding positively to its collections across diverse product categories. Management is optimistic about its robust global platform, which will drive growth of Guess and Marciano businesses, alongside rag & bone, the company's inaugural acquisition.

The Zacks Consensus Estimate for Guess?’s current fiscal-year EPS has moved down by a couple of cents in the past seven days to $2.91. GES’s stock has rallied 46.9% in the past year.

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