The transition to online shopping and hybrid work models has had a major impact on the fashion industry, accelerating the use of home delivery services and e-commerce platforms. Additionally, exports strengthen the sector, establishing it as a key player in global trade. The global apparel market is projected to grow at a CAGR of 4.1% from 2024 to 2030.

Furthermore, millennials are among the fastest-growing consumer groups in the luxury fashion market. Being tech-savvy and having grown up in the age of mobile technology, they are deeply immersed in the omnichannel experience. Therefore, the global luxury fashion market is projected to grow at a CAGR of 5.8% by 2032.

Against this backdrop, let’s compare two apparel retail stocks to analyze which apparel retail stocks one should be considered: Hanesbrands Inc. (HBI) and American Eagle Outfitters, Inc. (AEO).

The Case for Hanesbrands Inc. Stock

Valued at $2.92 billion by market cap, Hanesbrands Inc. (HBI) is a consumer goods company that designs, manufactures, sources, and sells a range of innerwear apparel for men, women, and children in the Americas, Europe, Asia Pacific, and internationally. The company operates through three segments: Innerwear, Activewear, and International. 

HBI’s stock has declined 1.9% over the past month but gained 16.9% over the past three months to close the last trading session at $8.29.

In terms of the trailing-12-month gross profit margin, HBI’s 37.92% is marginally higher than the 37.80% industry average. Its 0.53% trailing-12-month EBITDA margin is lower than the industry average of 11.42%.

HBI’s net sales for the third quarter that ended September 28, 2024, declined 2.5% year-over-year to $937.10 million. However, the company’s net income and earnings per share came in at $29.95 million and $0.09, compared to net loss and loss per share of $38.80 million and $0.11, respectively, in the previous-year quarter.

Street expects HBI’s revenue for the quarter ended December 2024 to decline 30.6% year-over-year to $900.41 million. The company’s EPS for the same quarter is expected to gain 376.4% year-over-year to $0.14. Moreover, the company failed to surpass consensus revenue estimates in three of the trailing four quarters.

HBI’s POWR Ratings reflect mixed prospects. It has an overall rating of C, which translates to Neutral in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

HBI is ranked #45 out of 59 stocks in the Fashion & Luxury industry. It has a C grade for Growth, Momentum, and Quality. To see HBI’s Value, Stability, and Sentiment ratings, click here.

The Case for American Eagle Outfitters, Inc. Stock

Valued at $3.31 billion by market cap, American Eagle Outfitters, Inc. (AEO)  operates as a multi-brand specialty retailer in the United States and internationally. The company provides jeans, apparel and accessories, and personal care products for women and men under the American Eagle brand and intimates, apparel, activewear, and swim collections under the Aerie and OFFLINE by Aerie brands. 

AEO’s stock has gained marginally intraday to close the last trading session at $17.22.

In terms of the trailing-12-month EBIT margin, AEO’s 8.27% is 2.5% higher than the 8.07% industry average. Likewise, its 12.35% trailing-12-month EBITDA margin is 8.2% higher than the industry average of 11.42%.

AEO’s total net revenues were $1.29 billion in the fiscal third quarter that ended on November 2, 2024. Its non-GAAP operating income came in at $123.65 million. In addition, the company’s non-GAAP net income came in at $93 million, and non-GAAP EPS came in at $0.48.

Street expects AEO’s revenue and EPS for the year ending January 31, 2025, to increase 1.4% and 11.3% year-over-year to $ 5.34 billion and $1.69, respectively. It surpassed the consensus EPS estimates in all of the trailing four quarters.

AEO’s robust fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, translating to a Buy in our proprietary rating system.

AEO has a B grade in Growth. It is ranked #16 in the same industry.

Click here for the additional POWR Ratings for AEO (Momentum, Sentiment, Quality, Stability, and Value).

Hanesbrands vs. American Eagle Outfitters: Which Apparel Retail Stock Should You Consider?

The apparel retail industry is experiencing robust growth, fueled by the rising number of millionaires, brand loyalty among customers, and the rising perception among consumers that luxury goods contribute to greater social acceptance.

Leading apparel companies, such as HBI and AEO, stand to capitalize on the optimistic industry outlook. However, AEO’s higher profitability and promising near-term outlook favor it as the better stock pick.

Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Fashion & Luxury industry here.

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AEO shares were trading at $16.65 per share on Tuesday afternoon, down $0.57 (-3.31%). Year-to-date, AEO has declined -0.12%, versus a 0.48% rise in the benchmark S&P 500 index during the same period.

About the Author: Nidhi Agarwal

Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities. More...

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