This earnings season, players in the textile-apparel space are likely to have benefited from their focus on enhancing brands through lucrative buyouts, innovation, alliances, licensing deals and efficient marketing gimmicks. Further, apparel players have been committed toward keeping pace with changing consumer preferences. To this end, rising inclination toward health and fitness is working in favor of activewear and sports equipment providers.
Moreover, digital endeavors like upgraded payment systems, improved e-commerce sites and effective mobile apps bode well. However, these initiatives and investments entail high costs, which pose a threat to margins. Nonetheless, solid cost-containment measures by these companies have been supporting the margins. Apart from this, a robust international presence has been a driver for these companies as it helps them solidify business, especially in markets like Asia and Europe. However, this exposes companies to risks related to volatile currency movements and tariffs.
Notably, the textile-apparel industry forms part of the broader Consumer Discretionary sector. Per the latest Earnings Outlook, total earnings of the Zacks Consumer Discretionary sector are expected to be up 6.8% for the quarter under review. Moreover, revenues for the sector are likely to improve 9.1%.
Let’s take a sneak peek into how the following apparel stocks are placed ahead of their fourth-quarter earnings releases. According to the Zacks model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
3 Upcoming Apparel Stock Earnings Releases
Columbia Sportswear Company (COLM - Free Report) is likely to see a decline in the bottom line, when it reports fourth-quarter 2019 results. Nonetheless, sales are likely to have improved. The company has a Zacks Rank #3 and an Earnings ESP of -0.80%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The company has been benefiting from solid continued investments in the direct-to-consumer or DTC business. Further, Columbia Sportswear’s brand enhancing and unique marketing initiatives have been working well, and the Columbia brand is steadily gaining market share. The company earlier stated that it expects continued growth from the SOREL brand, courtesy of constant upgrades and effective strategies. Apart from these, Columbia Sportswear’s top line has been gaining from a solid international presence. However, due to exposure in international markets, the company is prone to currency fluctuations.
Also, the company has been witnessing high SG&A costs stemming from increased investments to improve global DTC operations, project-related expenses and other demand creation spending. Nevertheless, focus on Project CONNECT bodes well. (Read More: How's Columbia Sportswear Placed Ahead of Q4 Earnings?)
Skechers U.S.A., Inc. (SKX - Free Report) is likely to report growth in top and bottom lines, when it announces fourth-quarter 2019 results. The company has a Zacks Rank #3 and an Earnings ESP of 0.00%.
Skechers’ enhanced focus on new lines of products, cost-containment efforts, inventory management and the global distribution platform is likely to show on its fourth-quarter performance. Further, the company's domestic e-commerce business has been contributing to the top line. In fact, Skechers’ international and direct-to-consumer businesses are primary catalysts. However, concerns related to higher general & administrative expenses, unfavorable currency fluctuations and stiff competition cannot be ignored. (Read More: Will Higher Revenues Drive Skechers' Q4 Earnings?)
Skechers U.S.A., Inc. Price and EPS Surprise
Hanesbrands Inc. (HBI - Free Report) is likely to see bottom-line growth, when it reports fourth-quarter 2019 results. However, sales are likely to see a decline. The company has a Zacks Rank #4 and an Earnings ESP of 0.00%.
Hanesbrands has been grappling with sluggishness in its Innerwear segment for quite some time. In fact, management had earlier guided a sales decline of 2% in the U.S. Innerwear segment for the fourth quarter. Further, the company is exposed to unfavorable foreign currency translations, as nearly one-third of its total sales come from international businesses. Hanesbrands estimated an impact of $20 million and $123 million on the fourth quarter and fiscal 2019 top line due to adverse currency fluctuations.
Nonetheless, the company is likely to have gained from the Project Booster program that aims at driving investment for growth, minimizing costs and increasing cash flow. Also, the company is on track with the expansion of its Champions product portfolio along with increasing distribution in China and South Korea. Buoyed by solid demand of Champions activewear products, Hanesbrands projected sales growth to the tune of high teens for the quarter under review. (Read More: Factors Likely to Decide Hanesbrands Fate in Q4 Earnings)
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