The Black Friday Sale, which boosts the retail sector is celebrated with great enthusiasm in the US. So, investors could watch quality retail stocks Victoria’s Secret & Co. (VSCO), Crocs, Inc. (CROX), and lululemon athletica inc. (LULU) before Black Friday.
The holiday shopping season is approaching, and according to the most recent Finder research, an estimated 132 million Americans intend to shop for pre-holiday specials (such as Black Friday and Cyber Monday) in 2023. During last year’s Black Friday sale, Mastercard SpendingPulse reported that U.S. in-store sales rose 12% from 2021, while e-commerce sales increased 14%.
The United States has one of the world’s largest retail markets, with significant growth in retail sales from $3 trillion in 2000 to over $7 trillion last year. Growth is expected to continue, reaching about $7.90 trillion in retail sales by 2026.
Moreover, in the global retail sector scenario, the fashion and apparel sector is expected to grow at a CAGR of 8.7% to become the world’s fastest-growing retail product category by 2026.
The fashion and luxury industry is a dynamic world of trends and styles, spanning clothing, accessories, fragrances, and more. Major brands invest in innovation, contributing to an industry celebrated for its elegance and exclusivity.
The Luxury Apparel Market is projected to reach $3.55 billion in revenue in 2023. It is expected to expand at a CAGR of 9.31% to reach $5.54 billion by 2028. The United States generates the majority of revenue, with a projected volume of $3.55 billion in 2023.
The number of users in the Luxury Apparel Market is expected to reach 14.10 million by 2028, with user penetration increasing from 3.4% in 2023 to 4.2% by 2028. Also, the revenue in the Luxury Fashion market is projected to reach $18.46 billion in 2023 and is expected to expand at a CAGR of 9.43% to reach $28.97 billion by 2028.
Considering these conducive trends, let’s look at the fundamentals of the three best Fashion & Luxury stocks, starting with number 3.
Stock #3: Victoria’s Secret & Co. (VSCO)
VSCO is a global retailer of women’s intimate apparel, beauty products, and accessories, with well-known brands such as Victoria’s Secret, PINK, Victoria’s Secret Beauty, and Adore Me. The company sells through retail locations, websites, and a variety of distribution channels, including franchise and wholesale agreements.
VSCO’s trailing-12-month gross profit margin of 43.72% is 22.5% higher than the industry average of 35.71%. Its 4.05% trailing-12-month CAPEX/Sales is 24.1% higher than the 3.26% industry average.
On October 17, 2023, VSCO and PINK launched their first-ever collections of adaptive intimates for women with disabilities, incorporating direct feedback from people with disabilities throughout the development process. They are the first intimate brands to receive the GAMUT Seal of Approval™ for inclusivity in adaptive products, reaffirming their commitment to creating products for all women.
This move reflects the company’s mission to celebrate women of all body types, sizes, and abilities and represents an important step in their future development and growth.
For the second quarter ended July 29, 2023, VSCO reported net sales of $1.43 billion and gross profit of $486.57 million. The company’s adjusted net income and adjusted operating income amounted to $18.85 million and $48.70 million.
Analysts expect VSCO’s revenue and EPS to grow 0.3% and 14.7% year-over-year to $1.41 billion and $0.32, respectively, for the first quarter ending April 2024.
Shares of VSCO increased 29% over the past month to close the last trading session at $18.81.
VSCO has a B grade for Value. Within the B-rated Fashion & Luxury industry, it is ranked #49 out of 63 stocks.
Click here for VSCO’s additional Growth, Momentum, Stability, Sentiment and Quality ratings.
Stock #2: Crocs, Inc. (CROX)
CROX is a world leader in innovative casual footwear for women, men, and children. Its product range includes clogs, sandals, shoes, boots, and more under the Crocs brand. The company distributes its products through various channels, including wholesalers, retail stores, e-commerce websites, and third-party marketplaces, serving customers in around 85 countries worldwide.
CROX’s trailing-12-month gross profit margin of 53.54% is 50% higher than the industry average of 35.71%. Its 25.63% trailing-12-month EBIT margin is 246.2% higher than the 7.40% industry average.
In the third quarter, the company resumed its share repurchase program, acquiring $150 million worth of common stock, equivalent to about 1.4 million shares, with an average share price of $107.85. Following these repurchases, the company retained $900 million in share repurchase authorization for potential future buybacks.
The company’s capital allocation priorities continue to focus on debt reduction and repurchasing shares as it approaches its long-term net leverage target of 1.0x to 1.5x.
During the third quarter ended September 30, 2023, CROX’s revenue grew 6.2% year-over-year to $1.05 billion. The company’s non-GAAP net income amounted to $200.35 million, up 8.1% year-over-year. Its non-GAAP gross profit and non-GAAP income from operations increased 10.7% and 7.8% year-over-year to $600.43 million and $295.92 million, respectively.
In 2023, the company expects consolidated revenue to grow by approximately 10% to 11%, reaching about $3,905 to $3,940 million. The Crocs Brand is anticipated to see revenue growth of approximately 12% to 13%, while the HEYDUDE Brand is expected to grow by around 4% to 6%, including the period before the HEYDUDE acquisition.
The adjusted operating margin is targeted at around 27%, with non-GAAP adjustments of about $60 million. Adjusted earnings per share are projected to be between $11.55 and $11.85, with capital expenditures of about $125 to $135 million, primarily for distribution expansion and technology systems.
Street expects CROX’s revenue and EPS to grow 3.2% and 3% year-over-year to $1.11 billion and $3.70, respectively, for the second quarter ending June 2024. The company has surpassed the revenue and EPS estimates in each of the trailing four quarters, which is impressive.
The stock has soared 5% over the past year to close the last trading session at $84.40.
CROX’s POWR Ratings reflect this robust outlook. CROX has a B grade for Value and Quality. Within the same industry, it is ranked #39.
In addition to the POWR Ratings stated above, one can access CROX’s additional Growth, Momentum, Stability, and Sentiment ratings here.
Stock #1: lululemon athletica inc. (LULU)
Based in Vancouver, Canada, LULU is a global company known for designing and distributing athletic apparel and accessories under the Lululemon brand, catering to both men and women. The company utilizes various channels for sales, including physical stores and online platforms, and has a presence in numerous countries worldwide.
LULU’s trailing-12-month gross profit margin of 56.75% is 58.9% higher than the industry average of 35.71%. Its 22.12% trailing-12-month EBIT margin is 198.8% higher than the 7.40% industry average.
On September 27, 2023, LULU and Peloton Interactive, Inc. (PTON) formed a five-year partnership, with PTON providing exclusive fitness content to LULU’s Studio All-Access Members, and LULU becoming PTON’s primary athletic apparel partner. This partnership aims to enhance fitness and wellbeing journeys for their communities in the United States, Canada, the United Kingdom, Germany, and Australia.
During the second quarter ended July 30, LULU’s net revenue and net income amounted to $2.21 billion and $341.60 million, up 18.2% and 18% year-over-year, respectively. The company achieved a gross profit of $1.30 billion, up 23% year-over-year. Also, income from operations rose 19.5% year-over-year to $479.26 million. Moreover, its EPS increased 18.6% year-over-year to $2.68.
LULU’s revenue and EPS are expected to increase 17.8% and 14.1% year-over-year to $2.19 billion and $2.28 for the third quarter ended October 2023. The company has surpassed the revenue and EPS estimates in each of the trailing four quarters, which is impressive.
The stock has soared 27.6% over the past year and 29.1% year-to-date to close the last trading session at $413.69.
LULU’s POWR Ratings reflect this sound outlook. LULU has an A grade for Quality and a B for Sentiment. Within the same industry, it is ranked #38.
To see LULU’s additional POWR Ratings for Growth, Value, Momentum, and Stability, click here.
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LULU shares were trading at $413.82 per share on Wednesday morning, up $0.13 (+0.03%). Year-to-date, LULU has gained 29.17%, versus a 15.53% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities. More...
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|CROX||Get Rating||Get Rating||Get Rating|
|VSCO||Get Rating||Get Rating||Get Rating|
|PTON||Get Rating||Get Rating||Get Rating|