Image Source: Unsplash

Most apparel companies established or strengthened their digital presence amid the COVID-19 pandemic to offset the decline in sales caused by lower foot traffic at their brick-and-mortar stores and outright store closures.

With solid progress on the vaccination front and rising consumer spending, the industry has witnessed decent sales growth of late, despite rising inflation and supply chain disruptions. Introducing new fashion apparel to keep pace with the changing consumer trends should enable apparel companies to grow this holiday season.

The lifting of travel bans affecting various nations should further drive apparel companies’ sales ahead of the holiday season. The National Retail Federation (NRF) forecasts holiday retail sales to rise between 8.5% -10.5% during November and December. Moreover, the global apparel market is expected to grow at 7.5% CAGR to $797.30 billion by 2025.

Given this backdrop, we think fundamentally sound apparel retailers Levi Strauss & Co. (LEVI), Under Armour, Inc. (UAA), Capri Holdings Limited (CPRI), and Ralph Lauren Corporation (RL) could be solid bets now.

Levi Strauss & Co. (LEVI)

LEVI is a San Francisco-based apparel company that designs, markets, and sells jeans, casual and dress pants, tops, jackets, footwear, and related accessories for men, women, and children worldwide. The company sells its products through third-party retailers and directly to consumers through company-operated mainline, outlet stores, and e-commerce sites. It operates approximately 3,100 brand-dedicated stores and shops-in-shops.

On Aug. 5, LEVI signed a purchase agreement to acquire Beyond Yoga, a fast-growing, premium athletic and lifestyle apparel brand, in the fourth quarter of 2021. This acquisition should  enable LEVI to enter the fast-growing activewear category and profitably scale a high-return digital business.

For its fiscal third quarter, ended Aug. 29, 2021, LEVI’s net revenues increased year-over-year to $1.50 billion. The company’s adjusted gross profit came in at $861.50 million, indicating a 51.3% rise from the prior-year period. Its adjusted EBIT was  $221.80 million.

LEVI’s adjusted income came in at $197.40 million for the quarter, marking a year-over-year improvement. Its adjusted EPS improved to $0.48. And the company had $1.38 billion in cash and cash equivalents as of Aug. 29, 2021.

Analysts expect LEVI’s EPS to improve year-over-year to $1.44 in the current year. The $5.76 billion consensus revenue estimate for the current year represents a 29.3% rise from the prior-year period. And it surpassed the Street’s EPS estimates in each of the trailing four quarters. LEVI closed Friday’s trading session at $27.53.

LEVI’s POWR Ratings reflect its promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has a B grade for Growth, Momentum, Sentiment, and Quality. Click here to see the additional ratings for LEVI’s Stability and Value. Of the 85 stocks in the Consumer Goods industry, LEVI is ranked #4.

Under Armour, Inc. (UAA)

UAA, which is headquartered in Baltimore, Md., develops, markets, and distributes branded performance apparel, footwear, and accessories made from synthetic microfibers for men, women, and youth worldwide. The company sells its products through wholesale and direct-to-consumer channels, including brand and factory house stores and e-commerce websites.

On Nov. 10, UAA selected Amazon.com, Inc. (AMZN) Amazon Web Services, Inc. (AWS) as its preferred cloud provider for SAP. UAA completed the migration of its SAP environments to AWS earlier this year to improve performance and visibility across its design, merchandising, planning, manufacturing, supply chain, and sales distribution channels.

Now, by integrating its SAP environments with AWS’ analytics, machine learning, compute, and storage, UAA hopes to fuel innovation in 3D apparel and footwear design, digitally connected footwear and apparel, resource-efficient production, direct-to-consumer sales, and global wholesale distribution.

UAA’s net revenues for the second quarter ended June 30, 2021, increased 7.9% year-over-year to $1.55 billion. The company’s gross profit came in at $788.10 million, up from the prior-year period. Its adjusted income from operations was $188.83 million for the quarter.

UAA’s adjusted net income was  $144.82 million, indicating a rise from the prior-year period. Its adjusted EPS increased 19.2% year-over-year to $0.31. UAA had $1.25 billion in total cash and cash equivalents as of Sept. 30, 2021.

Analysts expect UAA’s EPS to improve to $0.75 for the current year. The stock surpassed consensus EPS estimates in each of the trailing four quarters. Analysts expect the stock’s revenue to grow 25.5% year-over-year to $5.62 billion. The stock ended Friday’s trading session at $25.02.

UAA’s POWR Ratings reflect this promising outlook. The stock has a B grade for Momentum, Sentiment, and Quality. Click here to see the additional ratings for UAA’s Growth, Value, and Stability. UAA is ranked #20 of 38 stocks in the B-rated Athletics & Recreation industry.

Capri Holdings Limited (CPRI)

Headquartered in London, U.K., CPRI designs, markets, distributes and retails branded women’s and men’s apparel, footwear, eyewear and fragrance, and accessories internationally. The company operates through three business segments: Versace; Jimmy Choo; and Michael Koris.

Its products are distributed through boutiques, retail stores, wholesale doors, department and specialty stores, and e-commerce sites and through vendors that have licensing agreements to manufacture and sell its products.

On Sept. 30, 2021, CPRI’s Versace brand extended its license agreement with EuroItalia, the Italy-based global fragrance, and cosmetics company, for another 15 years. CPRI’s Michael Kors and EuroItalia will also enter  a 15-year agreement to make EuroItalia the exclusive worldwide men’s and women’s fragrance licensee for the Michael Kors brand.

For its fiscal second quarter ended Sept. 25, 2021, CPRI’s total revenue increased to $1.30 billion. The company’s adjusted gross profit came in at $897 million. CPRI’s adjusted income from operations came in at $241 million, indicating a 32.4% increase from the prior-year period.

While its adjusted net income increased year-over-year to $235 million, its adjusted EPS grew to $1.53. CPRI had $234 million in cash and cash equivalents as of Sept. 25, 2021. Analysts expect the stock’s EPS to grow to $5.34 in the current year.

A $5.41 billion consensus revenue estimate for the current year represents a rise from the prior-year period. CPRI surpassed consensus EPS estimates in each of the trailing four quarters. Analysts expect the stock’s EPS to grow at a 54.9% rate per annum over the next five years. The stock ended Friday’s trading session at $63.34.

It is no surprise that CPRI has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has an A grade for Quality, and a B grade for Momentum and Sentiment. Click here to see the additional ratings for CPRI (Growth, Value, and Stability). Of the 63 stocks in the A-rated Fashion & Luxury industry, CPRI is ranked #23.

Ralph Lauren Corporation (RL)

New York City’s RL designs, markets, and distributes lifestyle products, including apparel, accessories, home furnishings, fragrances, and hospitality internationally. The company sells its products to mid-tier department stores, specialty stores, golf, and pro shops and directly to consumers through its retail stores, concession-based shops-within-shops, and its digital commerce sites.

On Oct. 26, 2021, RL’s The Ralph Lauren Corporate Foundation and the Soil Health Institute announced a founding grant to launch the Institute’s U.S. Regenerative Cotton Fund (USRCF), a unique, farmer-facing, science-based initiative that will support long-term, sustainable cotton production in the United States and eliminate one million metric tons of CO2 equivalent from the atmosphere by 2026. The partnership marks RL’s  efforts to create a sustainable future for U.S. cotton production.

For its fiscal second quarter ended Sept. 25, 2021, RL’s adjusted net revenues came in at $1.50 billion, representing a rise from the prior-year period. The company’s adjusted gross profit was  $1.01 billion, up from the prior-year period. Its adjusted operating income was $256.60 million for the quarter. And its adjusted net income came in at $197 million. Its adjusted EPS increased year-over-year to $2.62. And as of Sept. 30, 2021, the company had $2.39 billion in cash and cash equivalents.

Analysts expect the stock’s EPS to grow to $7.41 for the current year. It surpassed consensus EPS in each of the trailing four quarters. A $5.94 billion  consensus revenue estimate for the current year represents a 35% rise from the prior-year period. RL’s EPS is expected to grow at a 74.9% rate per annum over the next five years. The stock ended Friday’s trading session at $124.91.

RL’s POWR Ratings reflect its solid prospects. The company has an overall B rating, which translates to Buy in our proprietary rating system. RL has a B grade for Value, Momentum, and Quality.

In addition to the POWR Ratings grades we have just highlighted, one can see RL’s Growth, Stability, and Sentiment here. RL is ranked #29 of 63 stocks in the Fashion & Luxury industry.