The Top 3 Fashion Stocks For Growth & Dividends

The fashion industry is in a state of flux. Fashion trends are constantly changing and companies in this industry must adapt to the needs of consumers. Otherwise, they risk falling behind.

In addition, traditional brick-and-mortar retail stores face a separate threat in the form of Amazon (AMZN) and others in the online shopping arena. The rise in e-commerce has made it difficult for mall-based retail stores to compete.

However, the top fashion stocks have been able to withstand changing consumer habits, and continue to grow earnings-per-share, even in a very difficult environment for retail.

Investors looking for exposure to the major fashion stocks should consider the following three stocks, all of which pay dividends. You can see the entire list of consumer-cyclical dividend stocks here.

Click here to instantly download your free list of 674 dividend-paying consumer cyclical stocks, along with important investing metrics like price-to-earnings ratios and dividend yields.

This article will discuss three of the top fashion stocks, including clothing retailers and fashion product manufacturers. The analysis will focus on the business models, growth outlooks, and total expected returns of the top fashion stocks.

Fashion Stock #3: The Gap Inc. (GPS)

Gap Inc. is a clothing and accessories retailer with operations around the world.

The company operates 6 distinct business segments: Gap, Banana Republic, Old Navy, Intermix, Hill City and Athleta. The Gap was founded in 1982 and has a market cap of $9.8 billion, with annual revenue of nearly $17 billion.

The Gap released fourth quarter and fiscal 2018 financial results on 2/28/2019.

GPS Results

Source: Earnings Slides

The company earned $0.72 per share for the fourth quarter, $0.03 per share above analyst estimates and an increase of 18% from the same quarter the previous year. Revenue declined 3.2% to $4.62 billion and missed analyst estimates by $66 million.

Comparable sales in the fourth quarter were down 1% overall and faced a difficult comparison. The prior-year period saw a 5% increase. Comparable sales for Old Navy were flat while Gap Global declined 5%. Comparable sales for the Banana Republic declined 1%.

Comparable sales were also flat for the year. In 2018, Old Navy increased comparable sales by 3%, while the Banana Republic saw a 1% increase. However, Gap posted a 5% comparable sales decline for the year.

For 2018, earnings-per-share improved 21% to $2.59 and revenue grew 4.6% to $16.6 billion. The Gap expects earnings-per-share to decline 3.1% to $2.51 in fiscal 2019.

The company will be spinning off its Old Navy brand, which accounts for 40% of sales, into a standalone entity. The Gap also expects to close nearly 230 stores over the next two years, which will reduce annual sales by $625 million and result in pretax expenses of at least $250 million.

The Gap’s earnings-per-share history has been quite erratic and the company has had difficulty sustaining growth from year to year over the last decade. Still, earnings-per-share increased an annual rate of 5.1% from 2009 to 2018.

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