The luxury industry is expected to prosper as internet shopping becomes more widespread and growing social media influence fashion trends. These factors have considerably increased luxury brands’ global reach and accessibility.
So, investors interested in investing in quality luxury stocks can consider buying Guess?, Inc. (GES), Caleres, Inc. (CAL), and Vera Bradley, Inc. (VRA).
The global luxury goods market is predicted to reach $684.30 billion by 2028 at a 13.6% CAGR. This expansion can be attributed to rising disposable income, shifting consumer preferences, and increasing the number of high-net-worth individuals.
Also, the expanding importance of social media and digital platforms has played a crucial role in fueling global demand for luxury goods.
The global luxury fashion market is expected to reach $294.7 billion by 2028 at a CAGR of 3.6%. The increasing number of affluent consumers and their rising income levels, the growing desire for exclusivity and uniqueness, the strength of branding and brand equity, the expanding importance of social media and digital platforms, and fast globalization are some of the primary reasons driving the market.
Furthermore, the expanding online shopping trend and the increasing demand for sustainable and ethically created luxury fashion products are boosting the industry. Collaborations between luxury fashion labels and celebrities or influencers also enhance customer interest.
In light of these encouraging trends, let’s look at the fundamentals of the three Fashion & Luxury stocks, beginning with number 3.
Stock #3: Guess?, Inc. (GES)
GES designs, markets, distributes, and licenses lifestyle collections of apparel and accessories for men, women, and children. It operates through five segments: Americas Retail; Americas Wholesale; Europe; Asia; and Licensing.
GES’ forward EV/Sales of 0.81x is 29.5% lower than the industry average of 1.15x. Its forward Price/Sales of 0.45x is 47.8% lower than the industry average of 0.86x.
GES’ trailing-12-month ROTA of 5.82% is 49.6% higher than the industry average of 3.89%. Its trailing-12-month ROCE of 31.87% is 187.5% higher than the industry average of 11.08%.
GES’ net revenue for the second quarter ended July 29, 2023, increased 3.4% year-over-year to $664.51 million. Its gross profit came in at $294.44 million, up 8.9% year-over-year.
Also, its adjusted net income and adjusted EPS came in at $39.71 million and $0.72, up 73.6% and 84.6% year-over-year, respectively.
The consensus revenue estimate of $2.77 billion for the year ending January 2024 represents a 3.1% increase year-over-year. Its EPS is expected to grow 9% year-over-year to $2.99 for the same period. It has surpassed EPS estimates in three of four trailing quarters. GES’ shares have gained 41.9% over the past year to close the last trading session at $23.08.
GES’ POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
GES also has a B grade for Growth and Value. It is ranked #12 out of 64 stocks in the B-rated Fashion & Luxury industry. Click here for the additional POWR Ratings for Sentiment, Stability, Momentum, and Quality for GES.
Stock #2: Caleres, Inc. (CAL)
CAL engages in the retail and wholesale of footwear business in the United States, Canada, Eastern Asia, and internationally. It operates through Famous Footwear and Brand Portfolio segments.
CAL’s forward EV/EBITDA multiple of 6.52 is 32.1% lower than the industry average of 9.60. Its forward EV/EBIT multiple of 8.37% is 35.8% lower than the industry average of 13.04.
CAL’s trailing-12-month gross profit margin of 43.39% is 22.4% higher than the 35.45% industry average. Its trailing-12-month ROCE of 33.70% is 204.1% higher than the 11.08% industry average.
CAL’s total current liabilities came in at $956.37 million for the period that ended July 29, 2023, compared to $1.14 billion for the period that ended July 30, 2022. Its total other liabilities came in at $476.01 million, compared to $2.03 billion for the same period.
Street expects CAL’s revenue to increase 2.8% year-over-year to $2.92 billion for the year ending January 2025. Its EPS is expected to grow 11.5% year-over-year to $4.64 for the same period. It has surpassed EPS estimates in three of four trailing quarters. Shares of CAL has gained 20.2% over the past three months to close the last trading session at $27.88.
CAL’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It is ranked #7 in the same industry. It has a B grade for Value, Sentiment, and Quality. To see additional CAL’s ratings for Growth, Stability, and Momentum, click here.
Stock #1: Vera Bradley, Inc. (VRA)
VRA designs, manufactures, and sells women’s handbags, luggage and travel items, fashion and home accessories, and gifts. It operates through three segments: Vera Bradley Direct, Vera Bradley Indirect, and Pura Vida.
VRA’s forward Price/Sales multiple of 0.41 is 52.6% lower than the industry average of 0.86. Its forward EV/Sales multiple of 0.48% is 58.1% lower than the industry average of 1.15.
VRA’s trailing-12-month levered FCF margin of 10.32% is 103.2% higher than the industry average of 5.08%. Its trailing-12-month gross profit margin of 50.58% is 42.7% higher than the industry average of 35.45%.
VRA’s net revenues came in at $128.17 million in the fiscal second quarter, which ended July 29, 2023. Its gross profit came in at $72.02 million, up 19% year-over-year. Also, its net income came in at $9.25 million, compared to a net loss of $29.77 million for the same period. Its EPS came in at $0.30, compared to a loss per share of $0.95.
Analysts expect VRA’s revenue to increase 3% year-over-year to $509.27 million for the year ending January 2025. Its EPS is expected to grow 491.9% year-over-year to $3.29 for the same period. It has surpassed EPS estimates in all four trailing quarters. The stock has gained 90.9% over the past year to close the last trading session at $6.51.
It’s no surprise that VRA has an overall A rating, equating to a Strong Buy in our POWR Ratings system. It has an A grade for Sentiment and a B for Value and Quality. It is ranked #2 in the same industry.
Beyond what is stated above, we’ve also rated VRA for Stability, Momentum, and Growth. Get all VRA ratings here.
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GES shares were trading at $22.87 per share on Monday afternoon, down $0.21 (-0.91%). Year-to-date, GES has gained 15.09%, versus a 17.89% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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