Retailers are set to hire a record number of workers for the upcoming holiday season. Moreover, with strong consumer confidence, higher wages and record low unemployment, an increasing number of Americans are willing to spend more.
Additionally, U.S. apparel retailers saw growth in same-store sales in August and are expected to maintain the momentum in the remainder of this year. Given the present circumstances, apparel companies seem like promising bets.
Holiday Season to Boost Apparel Sales
Per Challenger Gray Christmas, the oldest executive outplacement firm in the United States, American retailers are expected to hire at least 700,000 workers for the December holidays. It will mark the highest level of hiring since 2015.
Additionally, retail sales are expected to grow 5% to 5.6% from the prior season, per Deloitte’s annual holiday season forecast. Sales between November 2017 and January 2018 grew 5%, amounting to $1.05 trillion, per data from the Commerce Department. Meanwhile, Deloitte forecasts more than $1.10 trillion of retail sales this year.
According to research firm Retail Metrics, apparel retailers’ same-store sales advanced 6.2% in August. Same-store sales for apparel retailers are expected to increase only 5.3% in September and 5% in October, but roughly 6.2% in November and upto 8% in December.
Per market research company Statista, the 2018 growth forecast for the global fashion industry is between 3.5% and 4.5%, while that of North America is between 1% and 2%. Apparel spending in the United States alone is expected to be about $372 billion by 2020. U.S. apparel market size is projected to rise from $225 billion in 2012 to $285 billion in 2025.
Apparel Stocks on Strong Ground
The Zacks Shoes And Retail Apparel industry, part of the broader Zacks Consumer Discretionary Sector, has also outperformed the S&P 500 and its own sector over the past year. While the stocks in this industry have collectively gained 50.8%, the Zacks S&P 500 Composite and the Zacks Consumer Discretionary Sector have rallied 16.3% and 11.4%, respectively. Also, the industry currently carries a Zacks Industry Rank #37, placing it in the top 14% of more than 250 Zacks industries.
The Zacks Textile - Apparel industry has gained 39.1% in the past year and has also outperformed the S&P 500 and the Zacks Consumer Discretionary Sector. The industry currently carries a Zacks Industry Rank #24, placing it in the top 9% of more than 250 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
On the earnings front, out of the 21 companies in the Zacks Textile - Apparel Industry, 19 reported earnings in the second quarter. Out of the 19, 15 posted an earnings beat, while one met the consensus estimate. Out of the 13 companies in the Zacks Shoes And Retail Apparel Industry, 12 reported earnings, with 11 posting an earnings beat.
5 Apparel Stocks to Buy Now
Record hiring and strong sales projection in the holiday season will benefit apparel stocks. Also, same-store sales for apparel retailers have increased in August and are expected to rise in the coming months. In this context, investing in apparel stocks seems like a prudent option.
In this context, we have selected five stocks that are expected to move north following these developments. These stocks also flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Guess', Inc. GES is a designer and distributor of lifestyle collections of apparel and accessories for men, women and children.
The company is based in Los Angeles, CA, and carries a Zacks Rank #1. The company has expected earnings growth of 48.10% for the current year. The Zacks Consensus Estimate for the current year has improved 3% over the last 30 days.
G-III Apparel Group, Ltd. GIII is a manufacturer and marketer of women's and men's apparel in the United States and globally.
The company is based in New York and carries a Zacks Rank #1. The company has expected earnings growth of 62.87% for the current year. The Zacks Consensus Estimate for the current year has improved 11.1% over the last 30 days.
Caleres, Inc. CAL is a retailer and wholesaler of footwear in the United States, Canada, Guam, and Italy.
The company is based in St. Louis, MO, and carries a Zacks Rank #2. The company has expected earnings growth of 15.74% for the current year. The Zacks Consensus Estimate for the current year has improved 0.8% over the last 30 days.
Duluth Holdings Inc. DLTH is a seller of casual wear and accessories for men and women under the Duluth Trading brand in the United States.
The company is based in Belleville, WI, and carries a Zacks Rank #2. The company has expected earnings growth of 25.07% for the current year. The Zacks Consensus Estimate for the current year has improved 3.7% over the last 30 days.
Tailored Brands, Inc. TLRD is a specialty apparel retailer in the United States, Puerto Rico and Canada.
The company is based in Houston, TX, and carries a Zacks Rank #2. The company has expected earnings growth of 13.64% for the current year. The Zacks Consensus Estimate for the current year has improved 1.2% over the last 30 days.
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