Most apparel companies established or strengthened their digital presence amid the COVID-19 pandemic to offset the decline in sales caused by lower foot traffic at their brick-and-mortar stores and outright store closures. With solid progress on the vaccination front and rising consumer spending, the industry has witnessed decent sales growth of late, despite rising inflation and supply chain disruptions. Introducing new fashion apparel to keep pace with the changing consumer trends should enable apparel companies to grow this holiday season.

The lifting of travel bans affecting various nations should further drive apparel companies’ sales ahead of the holiday season. The National Retail Federation (NRF) forecasts holiday retail sales to rise between 8.5% -10.5% during November and December. Moreover, the global apparel market is expected to grow at 7.5% CAGR to $797.30 billion by 2025.

Given this backdrop, we think fundamentally sound apparel retailers Levi Strauss & Co. (LEVI), Under Armour, Inc. (UAA), Capri Holdings Limited (CPRI), and Ralph Lauren Corporation (RL) could be solid bets now.

Levi Strauss & Co. (LEVI)

LEVI is a San Francisco-based apparel company that designs, markets, and sells jeans, casual and dress pants, tops, jackets, footwear, and related accessories for men, women, and children worldwide. The company sells its products through third-party retailers and directly to consumers through company-operated mainline, outlet stores, and e-commerce sites. It operates approximately 3,100 brand-dedicated stores and shops-in-shops.

On August 5, LEVI signed a purchase agreement to acquire Beyond Yoga, a fast-growing, premium athletic and lifestyle apparel brand, in the fourth quarter of 2021. This acquisition should  enable LEVI to enter the fast-growing activewear category and profitably scale a high-return digital business.

For its fiscal third quarter, ended August 29, 2021, LEVI’s net revenues increased 40.9% year-over-year to $1.50 billion. The company’s adjusted gross profit came in at $861.50 million, indicating a 51.3% rise from the prior-year period. Its adjusted EBIT was  $221.80 million, representing a 163.4% rise from the prior-year period. LEVI’s adjusted income came in at $197.40 million for the quarter, marking a 530.7% year-over-year improvement. Its adjusted EPS improved 500% year-over-year to $0.48. And the company had $1.38 billion in cash and cash equivalents as of August 29, 2021.

Analysts expect LEVI’s EPS to improve 585.7% year-over-year to $1.44 in the current year. S $5.76 billion consensus revenue estimate for the current year represents a 29.3% rise from the prior-year period. And it surpassed the Street’s EPS estimates in each of the trailing four quarters.

The stock has gained 61.1% in price over the past year and 10.9% over the past month. LEVI closed yesterday’s trading session at $27.15.

LEVI’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has a B grade for Growth, Momentum, Sentiment, and Quality. Click here to see the additional ratings for LEVI’s Stability and Value. Of the 85 stocks in the Consumer Goods industry, LEVI is ranked #4.

Under Armour, Inc. (UAA)

UAA, which is headquartered in Baltimore, Md., develops, markets, and distributes branded performance apparel, footwear, and accessories made from synthetic microfibers for men, women, and youth worldwide. The company sells its products through wholesale and direct-to-consumer channels, including brand and factory house stores and e-commerce websites.

On November 10, UAA selected Amazon.com, Inc. (AMZN) Amazon Web Services, Inc. (AWS) as its preferred cloud provider for SAP. UAA completed the migration of its SAP environments to AWS earlier this year to improve performance and visibility across its design, merchandising, planning, manufacturing, supply chain, and sales distribution channels. Now, by integrating its SAP environments with AWS’ analytics, machine learning, compute, and storage, UAA hopes to fuel innovation in 3D apparel and footwear design, digitally connected footwear and apparel, resource-efficient production, direct-to-consumer sales, and global wholesale distribution.

UAA’s net revenues for the second quarter, ended June 30, 2021, increased 7.9% year-over-year to $1.55 billion. The company’s gross profit came in at $788.10 million, up 14.8% from the prior-year period. Its adjusted income from operations was $188.83 million for the quarter, representing a 42.2% rise from the prior-year period. UAA’s adjusted net income was  $144.82 million, indicating a 22.6% rise from the prior-year period. Its adjusted EPS increased 19.2% year-over-year to $0.31. UAA had $1.25 billion in total cash and cash equivalents as of September 30, 2021.

Analysts expect UAA’s EPS to improve 388.5% year-over-year to $0.75 for the current year. The stock surpassed consensus EPS estimates in each of the trailing four quarters. Analysts expect the stock’s revenue to grow 25.5% year-over-year to $5.62 billion.

UAA has gained 70.8% in price over the past year and 24% over the past month. The stock ended yesterday’s trading session at $24.78.

UAA’s POWR Ratings reflect this promising outlook. The stock has a B grade for Momentum, Sentiment, and Quality. Click here to see the additional ratings for UAA’s Growth, Value, and Stability.

UAA is ranked #20 of 38 stocks in the B-rated Athletics & Recreation industry.

Capri Holdings Limited (CPRI)

Headquartered in London, U.K., CPRI designs, markets, distributes and retails branded women’s and men’s apparel, footwear, eyewear and fragrance, and accessories internationally. The company operates through three business segments: Versace; Jimmy Choo; and Michael Koris. Its products are distributed through boutiques, retail stores, wholesale doors, department and specialty stores, and e-commerce sites and through vendors that have licensing agreements to manufacture and sell its products.

On September 30, 2021, CPRI’s Versace brand extended its license agreement with EuroItalia, the Italy-based global fragrance, and cosmetics company, for another 15 years. CPRI’s Michael Kors and EuroItalia will also enter  a 15-year agreement to make EuroItalia the exclusive worldwide men’s and women’s fragrance licensee for the Michael Kors brand.

For its fiscal second quarter, ended September 25, 2021, CPRI’s total revenue increased 17.1% year-over-year to $1.30 billion. The company’s adjusted gross profit came in at $897 million, representing a 25.4% year-over-year improvement. CPRI’s adjusted income from operations came in at $241 million, indicating a 32.4% increase from the prior-year period. While its adjusted net income increased 71.5% year-over-year to $235 million, its adjusted EPS grew 70% to $1.53. CPRI had $234 million in cash and cash equivalents as of September 25, 2021.

Analysts expect the stock’s EPS to grow 181.1% year-over-year to $5.34 in the current year. A $5.41 billion consensus revenue estimate for the current year represents a 33.3% rise from the prior-year period. CPRI surpassed consensus EPS estimates in each of the trailing four quarters. Analysts expect the stock’s EPS to grow at a 54.9% rate per annum over the next five years.

CPRI has gained 132.2% in price over the past year and 29.9% over the past month. The stock ended yesterday’s trading session at $64.20.

It is no surprise that CPRI has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has an A grade for Quality, and a B grade for Momentum and Sentiment. Click here to see the additional ratings for CPRI (Growth, Value, and Stability).

Of the 63 stocks in the A-rated Fashion & Luxury industry, CPRI is ranked #23.

Ralph Lauren Corporation (RL)

New York City’s RL designs, markets, and distributes lifestyle products, including apparel, accessories, home furnishings, fragrances, and hospitality internationally. The company sells its products to mid-tier department stores, specialty stores, golf, and pro shops and directly to consumers through its retail stores, concession-based shops-within-shops, and its digital commerce sites.

On October 26, 2021, RL’s The Ralph Lauren Corporate Foundation and the Soil Health Institute announced a founding grant to launch the Institute’s U.S. Regenerative Cotton Fund (USRCF), a unique, farmer-facing, science-based initiative that will support long-term, sustainable cotton production in the United States and eliminate one million metric tons of CO2 equivalent from the atmosphere by 2026. The partnership marks RL’s  efforts to create a sustainable future for U.S. cotton production.

For its fiscal second quarter, ended September 25, 2021, RL’s adjusted net revenues came in at $1.50 billion, representing a 26% rise from the prior-year period. The company’s adjusted gross profit was  $1.01 billion, up 27.4% from the prior-year period. Its adjusted operating income was $256.60 million for the quarter, indicating a 70% year-over-year improvement. And its adjusted net income came in at $197 million, representing an 83.9% rise from the year-ago period. Its adjusted EPS increased 81.9% year-over-year to $2.62.And as of September 30, 2021, the company had $2.39 billion in cash and cash equivalents.

Analysts expect the stock’s EPS to grow 335.9% year-over-year to $7.41 for the current year. It surpassed consensus EPS in each of the trailing four quarters. A $5.94 billion  consensus revenue estimate for the current year represents a 35% rise from the prior-year period. RL’s EPS is expected to grow at a 74.9% rate per annum over the next five years.

RL has gained 55.2% in price over the past year and 11.5% over the past month. The stock ended yesterday’s trading session at $125.16.

RL’s POWR Ratings reflect its solid prospects. The company has an overall B rating, which translates to Buy in our proprietary rating system. RL has a B grade for Value, Momentum, and Quality.

In addition to the POWR Ratings grades we have just highlighted, one can see RL’s Growth, Stability, and Sentiment here. RL is ranked #29 of 63 stocks in the Fashion & Luxury industry.

LEVI shares were unchanged in after-hours trading Friday. Year-to-date, LEVI has gained 38.49%, versus a 26.20% rise in the benchmark S&P 500 index during the same period.

About the Author: Sweta Vijayan

Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...

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