These Retail Apparel Stocks Are Standing Out In Terms Of Growth & Value This Earnings Season

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Investors looking for stocks with sound value and attractive growth prospects may want to take a look at the retail sector at the moment.

Specifically, several retail apparel stocks are starting to check these boxes after surpassing their quarterly earnings expectations last week and here are a few to consider.

American Eagle Outfitters (AEOFree Report)

Daunting a Zacks Rank #1 (Strong Buy), the increasing popularity of American Eagle Outfitters' brands shouldn’t be overlooked with the company reporting a record $1.67 billion in fourth quarter sales last Thursday. This beat Q4 sales estimates by 1% and was a 12% increase from the prior year quarter. The top line expansion was driven by its Aerie brand which achieved record Q4 revenue and bolstered demand outside of the flagship American Eagle brand.

The trendy high-quality special apparel retailer posted Q4 earnings of $0.61 per share which comfortably surpassed the Zacks Consensus of $0.50 a share. More impressive, Q4 earnings soared 65% from $0.37 per share a year ago. Overall, AEO ended its fiscal 2024 with annual earnings increasing 57% to $1.52 per share and total sales rising 5% to $5.26 billion.

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American Eagle Outfitters’ profit improvement initiatives should continue to pay off and AEO shares trade at 14X forward earnings which is a slight discount to the Zacks Retail-Apparel and Shoes industry average of 17.2X and well below the S&P 500’s 21.4X. Notably, American Eagle Outfitters announced a new "Powering Profitable Growth" campaign which is a long-term strategy structured to deliver $5.7-$6 billion in annual revenue and an approximate 10% operating margin by the end of fiscal 2026.

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The Gap (GPS - Free Report)

Reforming its iconic brands to compete against other up-and-coming apparel retailers, The Gap’s stock also sports a Zacks Rank #1 (Strong Buy). The Gap reported its Q4 results last Thursday as well and reconfirmed the resurgence of its bottom line with earnings of $0.49 a share crushing estimates of $0.20 a share by 145%. Furthermore, Q4 earnings climb swung from an adjusted loss of -$0.75 a share in the comparative quarter.

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Fourth quarter sales of $4.29 billion were up 1% YoY and beat estimates of $4.24 billion by 2%. Improved trends at Old Navy and Gap were attributed to the company’s favorable quarterly results with its other notable brands including Banana Republic and Athleta. The Gap ended its FY24 with annual earnings soaring to $1.43 per share compared to an adjusted loss of -$0.40 a share in FY23. This was despite total sales decreasing -4% to $14.89 billion.

Although FY25 EPS is expected to dip to $1.20 per share, The Gap’s stock trades at a reasonable 17.5X forward earnings multiple. Plus, FY26 EPS is forecasted to rebound and rise 15% to $1.37 per share. More intriguing, GPS shares trade at just 0.52X forward sales with total sales projected to be virtually flat in FY25 and then rise 1% in FY26 to $15.08 billion.

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Other Stocks to Watch

Sporting a Zacks Rank #2 (Buy) after exceeding its Q4 top and bottom-line expectations last Tuesday, Abercrombie & Fitch (ANFFree Report)  has remained among the crème of the crop regarding expansive yet fairly valued apparel stocks. Meanwhile, Guess (GESFree Report)  stock may also appease value investors and sports a Zacks Rank #2 (Buy) ahead of its Q4 results on Tuesday, March 12.  

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