The apparel retail industry benefits as increased disposable income and consumer confidence drive higher demand for clothing and fashion products. Therefore, investors could consider buying apparel retail stocks, Urban Outfitters, Inc. (URBN - Get Rating), The TJX Companies, Inc. (TJX - Get Rating), and H & M Hennes & Mauritz AB (publ) (HNNMY - Get Rating).

According to the World Trade Organization (WTO), the global apparel market is characterized by the influence of various factors, such as rising disposable incomes, population growth, and the increasing impact of fashion trends. The market is projected to grow at a CAGR of 8% by 2033.

Moreover, the increasing impact of social media and digital marketing has boosted brand visibility and consumer interaction, making luxury clothing more accessible and appealing. The growing population of millionaires and strong brand loyalty among customers are expected to drive further growth.

Considering the industry’s conducive trends, let’s examine the fundamentals of the three Fashion & Luxury stock picks, beginning with the third choice.

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.

In terms of the trailing-12-month net income margin, URBN’s 6.11% is 42.4% higher than the 4.29% industry average. Similarly, its 15% trailing-12-month ROCE is 38.9% higher than the 10.80% industry average.

URBN’s total revenue for the fiscal third quarter ended October 31, 2024, increased 6.3% year-over-year to $1.36 billion. Its gross profit was $497.32 million, up 9.4% year-over-year. Additionally, its net income and net income per share were $102.91 million and $1.10, respectively, reflecting 24% and 25% increases compared to the prior-year quarter.

Street expects URBN’s revenue for the quarter ended January 2025 to increase 9.5% year-over-year to $1.63 billion. Its EPS for the same quarter is expected to grow 37.9% year-over-year to $0.95. It surpassed the consensus revenue and EPS estimates in three of the trailing four quarters.

URBN’s stock has gained 45.6% over the past six months to close the last trading session at $56.60.

URBN’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates 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.  

It is ranked #16 out of 60 stocks in the Fashion & Luxury industry. It has a B grade for Growth and Sentiment. In addition to the POWR Ratings grades I’ve just highlighted, you can see URBN’s ratings for Value, Quality, Stability, and Momentum 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. 

TJX’s trailing-12-month net income margin of 8.63% is 101.1% higher than the industry average of 4.29%. Its trailing-12-month EBIT margin of 11.07% is 39.5% higher than the 7.53% industry average. Also, the stock’s trailing-12-month EBITDA margin of 12.92% is 14.3% higher than the 11.30% 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 27.3% over the past nine months to close the last trading session at $124.69.

TJX has an overall B rating, equating to a Buy in our proprietary rating system. TJX has a B grade for Quality, Stability, and Sentiment.

It is ranked #15 in the same industry. To see TJX’s Growth, Value, and Momentum rating, click here.

Stock #1: H & M Hennes & Mauritz AB (publ) (HNNMY - Get Rating)

HNNMY provides clothing, accessories, footwear, cosmetics, home textiles, and homeware for women, men, and children worldwide. It offers sportswear, shoes, bags, beauty products, activewear, jeans, ready-to-wear, and interior products, including bed linens, dinnerware, textiles, furniture, and lighting. 

HNNMY’s trailing-12-month gross profit margin of 53.47% is 42% higher than the 37.67% industry average. Its trailing-12-month levered FCF margin of 11.48% is 144.6% higher than the industry average of 4.69%.

HNNMY’s net sales for the year ended on November 1, 2024, amounted to SEK234.48 billion ($21.40 billion). Its gross profit grew 3.6% from the year-ago value to SEK125.30 billion ($11.43 billion), while the operating profit rose 19% from the prior-year period to SEK17.31 billion ($1.58 billion).

Moreover, the company’s profit for the period increased 32.9% year-over-year to SEK11.58 billion ($1.06 billion), and EPS attributable stood at SEK7.21, up 34.3% year-over-year.

For the first quarter ending February 2025, analysts expect HNNMY’s revenue to increase 2% year-over-year to $5.15 billion.

Shares of HNNMY have gained 1.2% over the past month to close the last trading session at $2.64.

HNNMY’s bright prospects are apparent in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.

HNNMY has an A grade for Quality and a B for Growth and Stability. It is ranked first in the same industry. 

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

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TJX shares were trading at $125.08 per share on Monday afternoon, up $0.39 (+0.31%). Year-to-date, TJX has gained 3.53%, versus a 3.24% 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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