With Black Friday on the horizon, the retail sector is poised to capitalize on the robust demand in the ever-evolving fashion and luxury industry. Hence, fundamentally strong retail stocks such as Victoria’s Secret (VSCO), Crocs (CROX), and lululemon (LULU) are becoming appealing additions to watchlists. Black Friday, a shopping extravaganza celebrated with fervor in the United States, is anticipated to boost the retail sector.
As the holiday shopping season approaches, research indicates that an estimated 132 million Americans plan to partake in pre-holiday specials, including Black Friday and Cyber Monday, in 2023. The previous Black Friday sale saw a 12% increase in in-store sales from the previous year, while e-commerce sales surged by 14%, as reported by Mastercard SpendingPulse.
The United States boasts one of the world’s largest retail markets, with substantial growth in retail sales, surging from $3 trillion in 2000 to over $7 trillion in the past year. The growth trajectory is expected to continue, potentially reaching around $7.90 trillion in retail sales by 2026.
Furthermore, in the global retail landscape, the fashion and apparel sector is predicted to experience a Compound Annual Growth Rate (CAGR) of 8.7%, establishing itself as the world’s fastest-growing retail product category by 2026.
The fashion and luxury industry encompass a dynamic realm of trends and styles, spanning clothing, accessories, fragrances, and more. Leading brands in this industry invest in innovation, contributing to an industry celebrated for its elegance and exclusivity.
In particular, the Luxury Apparel Market is projected to generate $3.55 billion in revenue in 2023, with expectations of expanding at a CAGR of 9.31% to reach $5.54 billion by 2028. The majority of this revenue is generated in the United States, with an estimated volume of $3.55 billion in 2023.
The number of users in the Luxury Apparel Market is anticipated to reach 14.10 million by 2028, with user penetration expected to increase from 3.4% in 2023 to 4.2% by 2028. Furthermore, revenue in the Luxury Fashion market is predicted to reach $18.46 billion in 2023 and is expected to grow at a CAGR of 9.43% to reach $28.97 billion by 2028.
Given these favorable industry trends, let’s delve into the fundamentals of the top three Fashion & Luxury stocks, beginning with the third-ranked stock.
Stock #3: Victoria’s Secret & Co. (VSCO – Get Rating)
VSCO is a global retailer specializing in women’s intimate apparel, beauty products, and accessories, with well-known brands like Victoria’s Secret, PINK, Victoria’s Secret Beauty, and Adore Me. The company reaches customers through various channels, including retail locations, websites, franchise agreements, and wholesale arrangements.
VSCO boasts a trailing-12-month gross profit margin of 43.72%, outperforming the industry average of 35.71% by 22.5%. Its trailing-12-month CAPEX/Sales ratio stands at 4.05%, a 24.1% premium over the industry average of 3.26%.
In a significant move on October 17, 2023, VSCO and PINK launched their inaugural collections of adaptive intimates designed for women with disabilities, shaped by direct feedback from individuals with disabilities. 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 women of all abilities.
This initiative underscores the company’s dedication to celebrating women of all body types, sizes, and abilities, representing a pivotal step in their future growth and development.
For the second quarter ending on 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 reached $18.85 million and $48.70 million, respectively.
Analysts anticipate that VSCO’s revenue and earnings per share (EPS) will grow by 0.3% and 14.7% year-over-year to $1.41 billion and $0.32, respectively, for the first quarter ending in April 2024.
Shares of VSCO have surged by 29% over the past month, closing the most recent trading session at $18.81.
The promising outlook is reflected in VSCO’s POWR Ratings. The company holds a B grade for Value and ranks 49th out of 63 stocks in the B-rated Fashion & Luxury industry.
Stock #2: Crocs, Inc. (CROX – Get Rating)
CROX is a global leader in innovative casual footwear for women, men, and children, offering a product range that includes clogs, sandals, shoes, boots, and more under the Crocs brand. The company distributes its products through a variety of channels, including wholesalers, retail stores, e-commerce websites, and third-party marketplaces, serving customers in approximately 85 countries worldwide.
CROX’s trailing-12-month gross profit margin is an impressive 53.54%, soaring 50% above the industry average of 35.71%. Additionally, its trailing-12-month EBIT margin stands at 25.63%, marking a remarkable 246.2% premium over the industry average of 7.40%.
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, at an average share price of $107.85. Following these repurchases, the company retains $900 million in share repurchase authorization for potential future buybacks.
CROX’s capital allocation priorities continue to focus on debt reduction and share repurchases as it nears its long-term net leverage target of 1.0x to 1.5x. During the third quarter ending on September 30, 2023, CROX achieved a year-over-year revenue growth
