The retail industry was adversely affected by the global supply chain disruptions and sky-high inflation in the past few months. However, resilient consumer spending amid high pent-up demand has allowed the retail industry to bounce back. In addition, the rapid adoption of e-commerce platforms has been playing a vital role in driving up the sales of traditional retail companies.
The apparel retail sector has been performing well despite the rising costs, thanks to the increasing demand for new clothing. The demand for activewear and athleisure products has increased significantly since the pandemic and is likely to continue amid the continued hybrid working backdrop. This bodes well with the clothing and accessories market.
Given this backdrop, fundamentally sound apparel retail stocks Chico's FAS, Inc. (CHS), Genesco Inc. (GCO), J.Jill, Inc. (JILL), and Designer Brands Inc. (DBI) could be solid additions to your portfolio now. These stocks have a ‘Strong Buy’ or ‘Buy’ rating in our proprietary POWR Ratings system.
Chico's FAS, Inc. (CHS)
CHS operates as an omnichannel retailer of women's private branded clothing, intimates, and complementary accessories. It operates under three brands: Chico's; White House Black Market (WHBM); and Soma. The company sells its products through approximately 1,266 retail stores, catalogs, and its own web platforms.
On March 22, the company introduced new mobile shopping apps for its Chico's, WHBM, and Soma Brands. This customer-centric app strategy is expected to boost the company’s sales and clientele.
CHS’ total net sales increased 39.4% year-over-year to $540.92 million in the fiscal first quarter (ended April 30). The company’s gross margin increased 70.8% from the year-ago value to $216.57 million. Its net income grew 491.2% from the year-ago value to $34.93 million, while its EPS increased 450% from the year-ago value to $0.28.
The consensus EPS estimate of $0.25 for its fiscal second quarter (ending July 2022) represents a 19.1% improvement year-over-year. The consensus revenue estimate of $543.90 million for the current quarter indicates a 15.2% increase from the same period last year.
It surpassed Street EPS estimates in each of the trailing four quarters. Over the past three months, the stock has gained 25.7% to close its last trading day at $5.08.
CHS’ POWR Ratings reflect this promising outlook. The stock's overall A rating translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
It has an A grade for Value and Quality and a B grade for Growth. Among the 68 stocks in the B-rated Fashion & Luxury industry, it is ranked #4. Click here to see the POWR ratings of CHS for Momentum, Stability, and Sentiment.
Genesco Inc. (GCO)
GCO is a specialty retailer of footwear, apparel, and accessories. The company operates through four segments: Journeys Group; Schuh Group; Johnston & Murphy Group; and Licensed Brands. It operates nearly 1,425 retail footwear and accessory stores in the United States, Puerto Rico, Canada, the United Kingdom, and the Republic of Ireland.
On February 7, GCO announced an increase of $100 million to its existing share repurchase authorization. This might boost shareholder returns significantly.
In the fiscal 2023 first quarter (ended April 30, 2022), GCO’s gross margin increased 50 basis points year-over-year to 48.3%. Its total debt was $14.71 million compared with a year-ago value of $44.16 million.
Analysts expect GCO’s EPS and revenue to increase 2.7% and 3.2% year-over-year to $2.42 and $620.08 million, respectively, in the fiscal third quarter (ending October 2022). GCO has surpassed the consensus EPS estimates in three of the trailing four quarters, which is impressive.
The stock has declined 8.6% over the past month to close its last trading day at $54.55.
GCO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. GCO also has an A grade for Value and Quality.
The stock is ranked #13 of 68 stocks in the Fashion & Luxury industry. Click here to see the ratings of GCO for Growth, Momentum, Stability, and Sentiment.
J.Jill, Inc. (JILL)
JILL is an omnichannel retailer of women's apparel in the United States. The company offers knit and woven tops, bottoms, dresses, sweaters, outerwear, footwear, and accessories, including scarves, jewelry, and hosiery. Its products are marketed under the J.Jill brand name and sold primarily through its retail stores and e-commerce platform.
JILL’s net sales increased 21.7% year-over-year to $157.07 million in the first quarter ended April 30, 2022. The company’s gross profit increased 24.6% from the year-ago value to $109.46 million, while its net income grew 178.7% year-over-year to $14.42 billion. JILL’s EPS rose 154% from the prior-year quarter to $1.02.
For fiscal 2022 (ending January 2023), JILL’s revenue is expected to increase 5.4% year-over-year to $616.80 million. Its EPS is expected to increase 25.3% to $2.67 in the current year.
JILL has gained 32.9% over the past three months to close yesterday’s trading session at $18.62.
The company has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. It is no surprise that JILL has an A grade for Sentiment, and Quality and a B for Growth and Value. Within the Fashion & Luxury industry, it is ranked first.
Beyond what we’ve stated above, we have also given JILL grades for Momentum and Stability. Get all the JILL ratings here.
Designer Brands Inc. (DBI)
DBI is a leading designer, producer, and retailer of footwear and accessories in North America. The company operates through three segments: U.S. Retail; Canada Retail; and Brand Portfolio. It offers its products under various brand names: Vince Camuto, Louise et Cie, Jessica Simpson, Lucky, JLO, Jenifer Lopez, and others.
On May 10, DBI introduced the ‘Warehouse Reimagined’ store located in Houston for an enhanced, immersive retail store experience. The new store elevates the company's Owned Brands and products and highlights well-known National Brands. This launch is expected to maximize DBI’s retail footprint and create partnership opportunities for the company.
On April 8, the company announced its long-term plans to drive its anticipated growth. It aims to double the sales of its Owned brands by 2026 by partnering with top National Brands and expanding its sourcing and supply chain capabilities to optimize speed deliveries.
In the first quarter ended April 30, 2022, DBI’s net sales increased 18.1% year-over-year to $830.54 million. Its adjusted net income improved 287.7% from the year-ago value to $36.73 million, while its adjusted EPS came in at $0.48, representing a 300% year-over-year improvement.
The consensus EPS estimate of $1.93 for fiscal 2022 (ending January 2023) represents a 13.7% improvement year-over-year. The consensus revenue estimate of $3.41 billion for the present year represents a 6.8% increase from the same period last year. DBI surpassed the EPS estimates in three of the trailing four quarters, which is impressive.
Over the past three months, the stock has gained 15.2%, closing yesterday’s trading session at $14.29.
DBI has an overall B rating, which translates to Buy in our proprietary rating system. It also has a B grade for Value. The stock is ranked #18 of 68 stocks in the Fashion & Luxury industry.
To see the other ratings of DBI for Growth, Momentum, Stability, Sentiment, and Quality, click here.
CHS shares were trading at $5.43 per share on Tuesday afternoon, up $0.35 (+6.89%). Year-to-date, CHS has gained 0.93%, versus a -21.44% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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