Thanks to robust consumer demand, expanding e-commerce, and sustainable fashion trends, the apparel sector is poised for good growth for the rest of 2024. Given the industry’s tailwinds, investors could consider buying fundamentally sound apparel stocks, Ross Stores, Inc. (ROST), Burlington Stores, Inc. (BURL), and The TJX Companies, Inc. (TJX).
With the news of the Fed's rate cut, inflationary pressures have eased slightly, providing more disposable income for consumers to spend on discretionary products like apparel. This rate cut serves to strengthen the supply chains and helps increase consumer’s confidence and their spending.
The global apparel market is anticipated to reach $2.26 trillion by 2030, exhibiting a CAGR of 4.1%. As per a Statista report, the number of users in the market is projected to reach 636.20 million by 2029.
Furthermore, the apparel market accounts for 1.6% of the world’s GDP, and the apparel industry revenue for the United States is valued at $358.70 billion.
With that in mind, let’s evaluate the fundamentals of the featured Fashion & Luxury industry stocks, starting with number three:
Stock #3: Ross Stores, Inc. (ROST)
ROST is engaged in operating off-price retail apparel and home fashion stores under the Ross Dress for Less and dd's DISCOUNTS brand names. The company’s stores primarily offer apparel, accessories, footwear, and home fashions.
On October 21, ROST announced that the company opened 43 Ross Dress for Less and 4 dd's DISCOUNTS stores across 22 different states in September and October. The new locations are part of its plan to add 89 new stores during fiscal 2024.
In terms of the trailing-12-month net income margin, ROST’s 9.82% is 115.7% higher than the 4.55% industry average. Similarly, its 12.06% trailing-12-month EBIT margin is 51.8% higher than the industry average of 7.95%. Also, its trailing-12-month ROCE of 43.24% compares to the industry average of 11.41%.
For the second quarter of 2024, which ended on August 3, ROST’s sales increased 7.1% year-over-year to $5.29 billion. Its net earnings rose 18.1% from the year-ago value to $527.15 million, while its earnings per share stood at $1.59, up 20.5% year-over-year. Also, the company’s store count increased to 2,148 stores.
As per the updated fiscal 2024 guidance for the fourth quarter, the company expects the earnings per share to be between $1.60 and $1.67.
Analysts expect ROST’s revenue for the third quarter ending October 31, 2024, to increase 5.1% year-over-year to $5.17 billion, while its EPS for the same period is expected to grow 6.6% from the prior-year quarter to $1.42. The company surpassed consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
ROST shares have surged 27.4% over the past year and 10.5% over the past six months to close the last trading session at $147.29.
ROST’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
ROST has a B grade for Momentum, Sentiment, and Quality. It is ranked #16 out of 60 stocks in the B-rated Fashion & Luxury industry. Click here to see the additional ratings for ROST (Growth, Value, and Stability).
Stock #2: Burlington Stores, Inc. (BURL)
BURL operates as a retailer of branded merchandise, providing fashion-focused merchandise that includes ready-to-wear apparel for women, menswear, youth apparel, footwear, accessories, toys, gifts, and beauty products.
BURL's trailing-12-month ROCE and gross profit margin of 45.17% and 43.08% are 295.9% and 14.7% higher than their respective industry averages of 11.41% and 37.56%. Likewise, its trailing-12-month asset turnover ratio of 1.39x is 39.5% above the industry average of 1.00x.
BURL's total revenue for the second quarter (ended August 3, 2024) increased 13.4% year-over-year to $2.47 billion. Its adjusted EBITDA grew 43.3% from the prior year’s quarter to $201.84 million. The company’s adjusted net income stood at $77.49 million, up 99.3% year-over-year, while its adjusted EPS doubled from the year-ago value to $1.20.
The company has updated its fiscal year 2024 outlook, and it now expects its total sales projection to range from 9% to 10% on top of the 10% increase for the 52 weeks ending January 27, 2024.
This forecast assumes comparable store sales will rise by 2% to 3%, building on the 4% increase for the same period. Additionally, it expects adjusted EBIT to increase range of 50 bps to 70 bps. This guidance suggests the adjusted EPS to be between $7.66 and $7.96.
Street expects BURL’s revenue for the fiscal third quarter (ending October 2024) to increase 11.5% year-over-year to $2.55 billion. Its EPS for the same period is expected to register a 58.2% growth from the prior year, settling at $1.55. In addition, it surpassed the EPS in three of the trailing four quarters, which is promising.
Over the past year, the stock has gained 109%, closing the last trading session at $255.32.
BURL’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It also has an A grade for Growth and B for Momentum, Sentiment, and Quality. Within the same B-rated industry, it is ranked #14. Click here to see BURL’s ratings for Value and Stability.
Stock #1: The TJX Companies, Inc. (TJX)
TJX is an off-price apparel and home fashion retailer worldwide. The company operates through four segments: Marmaxx; HomeGoods; TJX Canada; and TJX International.
On June 7, TJX entered into an agreement for a joint venture with Grupo Axo, S.A.P.I. de C.V., where TJX would own 49 percent and Axo would own 51 percent. The agreement would comprise Axo’s off-price physical store business in Mexico, which includes over 200 stores.
The stock’s trailing-12-month net income margin of 8.56% is 88% higher than the industry average of 4.55%. Similarly, its 66.2% trailing-12-month ROCE is 480.1% above the industry average of 11.41%. Also, its trailing-12-month asset turnover ratio of 1.87x compares favorably to the industry average of 1.00x.
In the fiscal second quarter of 2025 that ended on August 3, TJX’s net sales increased 5.6% year-over-year to $13.47 billion. It reported income before income taxes of $1.47 million, indicating a 10.6% growth from the prior-year quarter. The company’s non-GAAP net income amounted to $61.64 million and $0.44 per share, reflecting increases of 180% and 175% year-over-year, respectively.
According to the financial guidance for fiscal year 2025, the company’s diluted earnings per share is projected to be between $4.09 and $4.13, with pre-tax profit margin anticipated to be approximately 11.2%.
The consensus revenue estimate of $13.97 billion for the fiscal third quarter (ending October 2024) represents a 5.3% increase year-over-year. The consensus EPS estimate of $1.10 for the same quarter indicates a 6.6% improvement year-over-year. The company has an impressive surprise history; it surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.
The stock has surged 29.8% over the past year and 23.9% over the past six months to close the last trading session at $115.66.
It’s no surprise that TJX has an overall rating of B, equating to a Buy in our POWR Ratings system. It has a B grade for Momentum, Sentiment, and Quality. Out of 60 stocks in the Fashion & Luxury industry, TJX is ranked #13.
Beyond what is stated above, we’ve also rated TJX for Growth, Value, and Stability. Get all TJX’s ratings here.
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TJX shares were trading at $115.37 per share on Tuesday afternoon, down $0.29 (-0.25%). Year-to-date, TJX has gained 24.30%, versus a 23.93% rise in the benchmark S&P 500 index during the same period.
About the Author: ShreyaRathi
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