Brand loyalty among customers and rising inclination towards luxury fashion are expected to enhance growth in the fashion industry. Therefore, investors could consider quality fashion stocks Tapestry, Inc. (TPR), Movado Group, Inc. (MOV), and Vera Bradley, Inc. (VRA) today.
Personal luxury goods is the second-largest segment of the luxury industry after luxury cars. Encompassing luxury apparel, accessories, watches, jewelry, and eyewear, the personal luxury goods market's revenue has increased steadily over the past decade.
Revenue in the Luxury Goods market is expected to amount to $75.69 billion in the US this year. The market is expected to grow at a CAGR of 1.9% until 2028.
In addition, the increasing inclination of the younger population towards expensive goods and rising purchasing power due to the rising disposable incomes of the middle class is likely to augment the fashion market.
As a result, the revenue in the fashion market is projected to reach $768.70 billion this year. Moreover, the market is expected to rise at a CAGR of 9.5%, resulting in a projected market volume of $1.10 trillion by 2027.
The global luxury goods market is expected to grow at a CAGR of 4.4% until 2028 to reach $429.36 billion.
Moreover, increasing communication between consumers and key players through social media platforms and online retail stores drives the latest trendy luxury apparel sales. The rise in online transactions has supported the market growth of luxury apparel over the last few years.
Take a look at the stocks mentioned above:
Tapestry, Inc. (TPR)
TPR provides luxury accessories and branded lifestyle products in the United States, Japan, Greater China, and internationally. The company operates in three segments, Coach; Kate Spade; and Stuart Weitzman.
TPR’s trailing-12-month gross profit margin of 69.92% is 98.7% higher than the 35.19% industry average. Its trailing-12-month net income margin of 13.51% is 221.8% higher than the 4.20% industry average.
TPR pays $1.20 annually as dividends which translates to a yield of 2.79% at the current price. Its four-year average dividend yield is 3.23%. Its dividend payouts have grown at 5.8% CAGR over the past three years.
During the fiscal third quarter ended April 1, 2023, TPR’s net sales increased 5% year-over-year to $1.51 billion. Net income increased 52.5% year-over-year to $186.70 million and net income per share increased 69.6% year-over-year to $0.78.
Analysts expect TPR’s revenue for the fiscal fourth quarter that ended June 2023 to increase 2.1% year-over-year to $1.66 billion. Its EPS is expected to increase 23.6% year-over-year to $0.96 for the same quarter. Also, it has surpassed EPS in each of the trailing four quarters, which is impressive.
Shares of TPR have gained 38.6% over the past nine months to close the last trading session at $43.36.
TPR’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has an A grade for Quality and a B in Growth. It is ranked #6 out of 66 stocks in the Fashion & Luxury industry.
Beyond what is stated above, we’ve also rated TPR for Momentum, Value, Stability, and Sentiment. Get all TPR ratings here.
Movado Group, Inc. (MOV)
MOV designs, sources, markets, and distributes watches worldwide. The company operates in two segments, Watch and Accessory Brands; and Company Stores.
MOV’s trailing-12-month EBITDA margin of 15.71% is 44.4% higher than the 10.88% industry average. Its trailing-12-month net income margin of 11.61% is 176.5% higher than the 4.20% industry average.
The company pays an annual dividend of $1.40, which translates to a yield of 5.15% at the current price level. It has a four-year average dividend yield of 3.53%. Its dividend payouts have grown at 51.8% CAGR over the past three years.
MOV's non-GAAP net sales came in at $144.91 million in the fiscal first quarter that ended April 30, 2023. Its non-GAAP operating expenses decreased marginally year-over-year to $70.40 million. Also, its non-GAAP net income attributable to MOV came in at $9.67 million and non-GAAP EPS came to $0.43.
Street expects MOV’s revenue for the fiscal second quarter ending July 2023 to be $165 million. Its EPS is expected to be $0.34 for the same quarter. Also, it has surpassed EPS estimates in each of the trailing four quarters.
The stock has gained 7% over the past month to close the last trading session at $28.21.
MOV’s robust prospects are reflected in its POWR Ratings. The stock has an overall B rating, equating to a Buy in our proprietary rating system.
MOV has an A grade for Value and a B in Sentiment and Quality. It is ranked #9 in the same industry.
Click here to see the additional POWR Ratings for MOV (Growth, Stability, and Momentum).
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.
On June 5, 2023, VRA and Tupperware Brands Corporation (TUP) announced the launch of their latest limited-edition product collaboration. Building on the success of the popular 2022 collection, the two brands are back with another line of must-have Tupperware food and drinkware containers featuring two of VRA's newest patterns, Sea Air Floral and Cloud Vine Multi.
On June 1, VRA announced that Vera Bradley, its iconic American bag and luggage lifestyle brand, had collaborated for the first time with global lifestyle brand Sanrio, best known for internationally recognized pop icon Hello Kitty, to unveil a co-branded collection.
VRA’s trailing-12-month gross profit margin of 48.07% is 36.6% higher than the 35.19% industry average. Its trailing-12-month levered FCF margin of 4.40% is 19.3% higher than the 3.69% industry average.
VRA’s net revenues came in at $94.36 million in the fiscal first quarter, which ended April 29, 2023. Non-GAAP gross profit came in at $51.75 million. Also, net loss decreased 52.7% year-over-year to $2.64 million and net loss per share available to VRA common shareholders decreased 50% year-over-year to $0.09.
VRA’s EPS for the fiscal second quarter ended July 2023 is expected to increase 50% year-over-year to $0.12. Its revenue is expected to increase marginally year-over-year to $130.95 million for the same quarter. Also, it has surpassed EPS estimates in three of the trailing four quarters.
The stock has gained 112.1% over the past nine months to close the last trading session at $6.47.
VRA’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
VRA also has an A grade for Sentiment and a B in Growth and Value. It is ranked #7 in the same industry.
To access VRA’s additional ratings for Momentum, Stability, and Quality, click here.
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TPR shares were trading at $42.50 per share on Wednesday morning, down $0.86 (-1.98%). Year-to-date, TPR has gained 13.17%, versus a 20.21% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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