The retail industry’s growth prospects appear promising due to the increasing number of wealthy consumers with higher incomes and the rising popularity of fast fashion. Given the industry’s tailwinds, investors could consider buying fundamentally sound retail stocks, Lands' End, Inc. (LE), Steven Madden, Ltd. (SHOO), and Nordstrom, Inc. (JWN), poised for summer sales.
The global luxury fashion market is driven by the increasing number of wealthy consumers with higher incomes, a growing desire for exclusivity and uniqueness, the strength of branding and brand equity, the rising impact of social media and digital platforms, and the rapid pace of globalization.
Looking forward, IMARC Group expects the global luxury fashion market to reach $327.10 billion by 2032, exhibiting a CAGR of 3.1% by 2032.
Furthermore, the U.S. fast fashion market is anticipated to witness a CAGR of 5.5% by 2030, owing to the increasing popularity of fast fashion among consumers seeking trendy and affordable clothing options. Online retailing is projected to be the dominating distribution channel in the U.S. Fast Fashion market.
Additionally, in 2024, the Luxury Fashion market worldwide is projected to generate a revenue of $115.90 billion. When compared globally, the United States leads in revenue generation with $27.67 billion in 2024, as the country has a well-established network of multi-brand shops in airports and shopping malls, which allow affluent consumers to choose from diversified product offerings of global luxury brands.
Moreover, investors’ interest in retail stocks is evident from the VanEck Retail ETF’s (RTH) 22.4% returns over the past year.
Considering these encouraging trends, let’s take a look at the fundamentals of the three best Fashion & Luxury industry stocks, beginning with the third choice.
Stock #3: Lands' End, Inc. (LE)
LE operates as a digital retailer of apparel, swimwear, outerwear, accessories, footwear, home products, and uniforms in the United States, Europe, Asia, and internationally. It operates through U.S. eCommerce; International; Outfitters; Third Party; and Retail segments.
LE’s trailing-12-month gross profit margin and levered FCF margin of 42.48% and 6.63% are 15.7% and 20% higher than the industry averages of 36.71% and 5.53%, respectively. Also, the stock’s trailing-12-month asset turnover ratio of 1.56x is 56.6% higher than the industry average of 0.99x.
On April 10, 2024, LE launched its new patent-pending WaveShaper technology, which will be incorporated into a new line called Sculpting Suits. This technology, built right into the fabric of the suit, is designed with varying levels of targeted zoned compression that seamlessly sculpts the body into an hourglass effect. The launch continues the brand’s longstanding tradition of innovative swim solutions.
In the fourth quarter that ended February 2, 2024, LE reported net revenue of $514.85 million. Its gross profit of $195.40 million indicates a growth of 13.5% year-over-year. In addition, as of February 2, 2024, the company’s total liabilities stood at $569.89 million, compared to $701.40 million as of January 27, 2023.
Street expects LE’s revenue and EPS for the fiscal year (ending January 2026) to increase 1.3% and 76.3% year-over-year to $1.40 billion and $0.34, respectively. It surpassed the consensus EPS estimates in three of the trailing four quarters, which is impressive.
Over the past six months, the stock has gained 102.4% to close the last trading session at $14.29.
LE’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
LE has an A grade for Sentiment and a B for Momentum, Quality, and Value. The stock is ranked #14 out of 60 stocks within the A-rated Fashion & Luxury industry.
To see the other ratings of LE for Growth and Stability, click here.
Stock #2: Steven Madden, Ltd. (SHOO)
SHOO designs, sources, and markets fashion-forward branded and private-label footwear, accessories, and apparel in the United States and internationally. It operates through Wholesale Footwear; Wholesale Accessories/Apparel; Direct-to- Consumer; and Licensing segments.
SHOO’s trailing-12-month gross profit margin of 41.65% is 13.4% higher than the 36.71% industry average. Likewise, the stock’s trailing-12-month EBIT margin of 11.40% is 47.6% higher than the 7.72% industry average. Its trailing-12-month EBITDA margin of 12.03% is 8.5% higher than the 11.09% industry average.
In the first quarter that ended March 31, 2024, SHOO’s net sales increased 3.9% year-over-year to $550.57 million. Its gross profit grew 6.5% year-over-year to $225.02 billion. In addition, the company’s adjusted net income grew 25% and 30% year-over-year to $47.03 million and $0.65 per share, respectively.
Analysts expect SHOO’s revenue for the second quarter (ending June 2024) to grow 17% year-over-year to $518.31 million. For the same quarter, the company’s EPS is expected to grow 10.6% from the prior year to $0.52. The company has surpassed the revenue estimates in three of the trailing four quarters.
Shares of SHOO have surged 28.8% over the past nine months and 42.4% over the past year to close the last trading session at $44.45.
SHOO’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
SHOO is ranked #13 in the same industry. You can check SHOO’s here.
Stock #1: Nordstrom, Inc. (JWN)
JWN, a fashion retailer, provides apparel, shoes, beauty, accessories, and home goods for women, men, young adults, and children.
JWN’s trailing-12-month ROCE of 16.89% is 47.4% higher than the 11.45% industry average. Also, its trailing-12-month ROTC of 6.62% is 6.7% higher than the 6.20% industry average. The stock’s trailing-12-month CAPEX/Sales of 3.87% is 27.4% higher than the 3.04% industry average.
During the first quarter, which ended May 4, 2024, JWN’s total revenues grew 10.8% year-over-year to $3.34 billion. The company’s adjusted net operating profit after tax increased 1.7% year-over-year to $466 million. In addition, as of May 4, 2024, the company’s total liabilities stood at $3.14 billion, compared to $3.65 million as of April 29, 2023.
The consensus revenue of $3.35 billion for the third quarter ending October 2024 represents a marginal increase year-over-year. Its EPS is expected to grow marginally year-over-year to $0.25 for the same period. Moreover, the company surpassed the consensus revenue estimates in three of the trailing four quarters.
Over the past year, JWN’s stock has gained 44.4% to close the last trading session at $22.10.
JWN’s POWR Ratings reflect its solid prospects. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
JWN has a B grade for Growth, Momentum, Quality, and Value. Within the same industry, it is ranked #12.
To see JWN’s additional ratings for Stability and Sentiment, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
JWN shares were trading at $23.17 per share on Monday afternoon, up $1.07 (+4.84%). Year-to-date, JWN has gained 27.00%, versus a 10.78% 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.
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