The apparel and fashion industry was hit hard in 2020 by store closures at the beginning of the pandemic and reduced demand for new clothing thereafter. The size of the global apparel market has shrunken significantly in 2020. However, apparel brands that pivoted and focused more on online sales during this period did much better than their brick-and-mortar-store-only peers.
Digital sales were the primary driver of growth for many of these brands in 2020 and the trend is expected to continue in 2021. Even though a global COVID-19 inoculation process has begun, the number of infection cases is still on the rise and it may be some time before consumer behavior returns to normal.
Nevertheless, the global apparel market size is expected to grow at a CAGR of 9.8% from 2020 and to hit $842.7 billion in 2025. This bodes well for fittest players in the industry.
Eagle Outfitters, Inc. (AEO), The Buckle, Inc. (BKE), and Zumiez, Inc. (ZUMZ) managed to do well in 2020 and have each recorded double-digit gains over the past year. We expect these stocks to continue performing well this year and beyond.
American Eagle Outfitters, Inc. (AEO)
AEO operates as a retailer of clothing and accessories in the United States and internationally. The company targets primarily the 15 – 25-year-old demographic. Over the past year, the stock has gained 61.8%.
AEO recently launched a marketing campaign for World Kindness Day, which encouraged participants to share kindness. The company also recently announced its AEO REAL Change Scholarship for Social Justice, which is a $5 million commitment towards helping AEO associates who are actively advocating social justice initiatives.
For the quarter ended October 31, 2020, the company saw a revenue rise of 34% compared to the same period last year. The company’s revenue from digital sources increased 29% during the same period.
AEO is expected to see a revenue growth of 26.4% for the quarter ended April 30, 2021 and 15.5% in 2022. The company’s EPS is estimated to grow 107.1% for the quarter ended April 30, 2021 and at a rate of 0.77% per annum over the next five years.
How does AEO stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
A for Peer Grade
B for Industry Rank
A for Overall POWR Rating
The stock is also ranked #12 of 70 stocks in the Fashion & Luxury industry.
The Buckle, Inc. (BKE)
BKE offers clothing, footwear, and accessories for fashion conscious individuals. The company targets the young-adult demographic. BKE’s stock has returned 29.1% over the past year.
In December, BKE announced a special $2.00 per share cash dividend for investors along with a quarterly dividend of $0.3 per share. The company’s net sales for December 2020 increased 17.9% compared to the same period last year.
For the quarter ended August 1, 2020, BKE saw an increase in net sales of 6% compared to the same period last year. During the quarter, 431 of 466 company stores were open for business while the rest were closed due to the COVID-19 pandemic. The company’s EPS is expected to rise 3.7% in 2021 and 4.5% in 2022.
BKE’s strong fundamentals are reflected in its POWR Ratings. It has a “Strong Buy” rating with an “A” for Trade Grade and Buy & Hold Grade. It is ranked #15 of 70 stocks in the Fashion & Luxury industry.
Zumiez, Inc. (ZUMZ)
ZUMZ is a specialty retailer that sells apparel for action sports primarily. The company sells clothing and accessories for skateboarding, snowboarding, surfing, motocross, and other sporting activities. Over the past year, ZUMZ’s stock has increased 26.3%.
For the 10-week period ended January 11, 2021, the company’s stores were open 95% of the time. The 5% closures were caused due to the coronavirus pandemic.
For the quarter ended October 31, 2020, ZUMZ saw an increase in net sales of 2.6% compared to the same period last year. The company’s diluted earnings per share increased 54.7% during the same period.
ZUMZ’s revenue is expected to grow 37.8% for the quarter ended April 30, 2021 and 10.5% in 2022. The company’s EPS growth is expected to be 10.3% in 2021 and 15% per annum over the next five years.
It is no surprise that ZUMZ has a “Strong Buy” in our POWR Ratings systems with a grade of “A” in Trade Grade and Buy & Hold Grade. In the 70-stock Fashion & Luxury industry, ZUMZ is ranked #20.
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AEO shares were trading at $23.46 per share on Tuesday morning, up $0.56 (+2.45%). Year-to-date, AEO has gained 16.89%, versus a 1.54% rise in the benchmark S&P 500 index during the same period.
About the Author: Aaryaman Aashind
Aaryaman is an accomplished journalist that’s passionate about providing in-depth insights about investing and personal finance. Recently he has been focused on the stock market and he specializes in evaluating high-growth stocks. More...
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