The apparel industry constantly adjusts to evolving consumer trends. Brands prioritizing sustainability, inclusivity, and digital-first shopping are incorporating eco-friendly materials and ethical production methods.

Therefore, investors looking to invest in fundamentally strong apparel stocks might consider investing in Urban Outfitters, Inc. (URBN - Get Rating), The TJX Companies, Inc. (TJX - Get Rating), and Abercrombie & Fitch Co. (ANF - Get Rating) with unique strategies.

The growth of e-commerce and online shopping has greatly changed the fashion retail industry, altering how consumers interact with brands and buy clothing. Driven by technological progress and shifting consumer habits, online shopping has become the preferred option for many, providing convenience, a broader selection of products, and the flexibility to shop anytime and anywhere.

With this, the global apparel market is projected to grow from $1.80 trillion in 2025 to $2.97 trillion by 2033, exhibiting a robust CAGR of 8%. Considering these encouraging trends, let’s take a look at the fundamentals of the three best Fashion & Luxury stocks, starting with #3.

Stock #3: Urban Outfitters, Inc. (URBN - Get Rating)

URBN engages in the retail and wholesale of general consumer products. The company operates through three segments: Retail; Wholesale; and Nuuly. The company focuses on brand loyalty and building a strong customer community.  

URBN’s trailing-12-month net income margin and ROCE of 6.11% and 15% are 42.3% and 38.5% higher than the respective industry averages of 4.29% and 10.83%.

URBN’s net sales for the third quarter that ended October 31, 2024, increased 6.3% year-over-year to $1.36 billion. Its gross profit came in at $497.32 million, up 9.4% from the year-ago quarter. The company reported net income of $102.91 million and $1.10 per common share, up 24% and 25% from the prior-year quarter, respectively.

Analysts expect URBN’s revenue for the fiscal fourth quarter ending January 2025 to increase 8.9% year-over-year to $1.62 billion. For the same quarter, Street expects its EPS to increase 36.3% year-over-year to $0.94. The company surpassed its revenue and EPS estimates in each of the trailing four quarters, which is promising.

URBN’s stock has soared 40.4% over the past year to close the last trading session at $55.01.

URBN’s POWR Ratings reflect its positive outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

URBN has a B grade for Sentiment and Growth. It is ranked #14 in the 60-stock B-rated Fashion & Luxury industry.

Beyond what is stated above, we’ve also rated URBN for Value, Momentum, Stability, and Quality. Get all URBN ratings here.

Stock #2: The TJX Companies, Inc. (TJX - Get Rating)

TJX operates as an off-price apparel and home fashion retailer in the United States, Canada, Europe, and Australia. It operates through four segments: Marmaxx, HomeGoods, TJX Canada, and TJX International. The company offers an assortment of merchandise at bargain prices.

TJX’s trailing-12-month EBIT margin of 11.07% is 36% higher than the industry average of 8.14%. Its trailing-12-month EBITDA margin of 12.92% is 12.6% higher than the 11.47% industry average. Also, the stock’s trailing-12-month net margin of 8.63% is 101% higher than the 4.29% industry average.

During the third quarter that ended November 2, 2024, TJX’s net sales rose 6% year-over-year to $14.06 billion, and its total segment profit grew 10.2% year-over-year to $1.84 billion. The company’s income before income taxes rose 9.3% from the year-ago value to $1.74 billion.

Furthermore, the company’s net income and EPS came in at $1.30 billion and $1.14, up 8.9% and 10.7% year-over-year, respectively.

Street expects TJX’s revenue and EPS for the first quarter (ending April 2025) to increase 5.6% and 6.8% year-over-year to $13.18 billion and $0.99, respectively. Moreover, the company topped the consensus EPS and revenue estimates in all four trailing quarters, which is impressive.

TJX’s stock has increased 30.8% over the past nine months and 29.1% over the past year to close the last trading session at $121.85.

TJX’s POWR Ratings reflect bright prospects. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.

TJX has a B grade for Stability, Momentum, Sentiment, and Quality. It is ranked #16 among 60 stocks in the same industry.

In addition to the POWR Ratings highlighted above, one can access TJX’s ratings for Growth and Value here.

Stock #1: Abercrombie & Fitch Co. (ANF - Get Rating)

ANF operates as an omnichannel retailer in the United States, Europe, the Middle East, Asia, the Asia-Pacific, Canada, and internationally. The company offers an assortment of apparel, personal care products, and accessories for men, women, and kids under the Abercrombie & Fitch, Abercrombie kids, Hollister, and Gilly Hicks brands. 

On December 4, ANF announced a multi-year franchise partnership with Myntra Jabong to expand its presence in the Indian market. The collaboration focuses on establishing retail stores, e-commerce platforms, and digital storefronts. The agreement supports long-term opportunities for global, omnichannel growth for the brands.

ANF’s trailing-12-month net income margin of 11.16% is 159.9% higher than the industry average of 4.29%. Its trailing-12-month EBIT margin of 14.84% is 82.3% higher than the 8.14% industry average. Also, the stock’s trailing-12-month EBITDA margin of 18% is 56.9% higher than the 11.47% industry average.

During the third quarter, which ended November 02, 2024, ANF’s net sales increased 14.4% year-over-year to $1.21 billion. Its adjusted operating income rose 25.4% from the year-ago value to $179.28 million. Net income attributable to A&F of $131.98 million indicates growth of 37.2% from the prior year’s quarter. Also, its adjusted EPS was $2.50, up 31.6% year-over-year.

Street expects ANF’s revenue and EPS for the fourth quarter (ended January 2025) to increase 7.8% and 19.6% year-over-year to $1.57 billion and $3.55, respectively. Also, the company has topped the consensus revenue and EPS estimates in all of the trailing four quarters.

Shares of ANF have surged 31% over the past year to close the last trading session at $130.35.

ANF’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.

ANF has an A grade for Quality. It is ranked #11 in the same industry.

Click here to access the additional ANF ratings (Growth, Momentum, Stability, and Value).

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TJX shares were trading at $121.85 per share on Monday afternoon, up $0.47 (+0.39%). Year-to-date, TJX has gained 0.86%, versus a 1.96% 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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