Is There a Buying Opportunity with These 3 Luxury Stocks? The increasing inclination of the younger population toward fashion trends and the growing influence of social media is expected to drive growth in the luxury market. So, should you buy...
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The increasing inclination of the younger population toward fashion trends and the growing influence of social media is expected to drive growth in the luxury market. So, should you buy luxury stocks TJX Companies (TJX), Tapestry (TPR), and Chico's FAS (CHS) now? Read more.
The fashion industry is fueled by constant innovation and the increasing influence of social media and digital platforms. Given the industry's steady growth prospects, investors could consider quality fashion stocks The TJX Companies, Inc. (TJX), Tapestry, Inc. (TPR), and Chico's FAS, Inc. (CHS).
Personal luxury goods, including luxury apparel, accessories, watches, jewelry, and eyewear, are the second-largest luxury industry segment after luxury cars. The personal luxury goods market's revenue has increased steadily over the past decade, apart from the hiccup caused by the coronavirus pandemic.
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 rising number of affluent consumers and their inflating income levels, growing aspiration for exclusivity and uniqueness, power of branding and brand equity, the increasing influence of social media and digital platforms, and rapid globalization are some of the major factors propelling the market.
The global luxury fashion market is expected to reach $294.70 billion by 2028, exhibiting a growth rate CAGR of 3.6% until 2028.
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:
The TJX Companies, Inc. (TJX)
TJX operates as an off-price apparel and home fashion retailer. It operates through four segments: Marmaxx; HomeGoods; TJX Canada; and TJX International. Its product portfolio includes footwear and accessories. It also offers home fashions, such as home basics, furniture, rugs, lighting products, and more.
TJX's trailing-12-month EBITDA margin of 11.59% is 8% higher than the 10.74% industry average. Its trailing-12-month net income margin of 7.56% is 80.3% higher than the 4.19% industry average.
On June 6, TJX declared a quarterly dividend of $0.33 per share, payable to its shareholders on August 31, 2023. The company's four-year average dividend yield is 1.30%, while its annual dividend of $1.33 translates to a 1.55% yield on prevailing prices.
For the first quarter of the fiscal year 2024, which ended April 29, 2023, TJX's net sales increased 3.3% year-over-year to $11.78 billion, while its income before income taxes rose 41.8% from the year-ago value to $1.21 billion. The company's net income and EPS amounted to $891 million and $0.76, representing increases of 51.8% and 55.1% from the prior-year quarter, respectively.
Street expects TJX's revenue and EPS for the second quarter of the fiscal year 2024 (ended June 30, 2023) to increase 4.9% and 10.7% year-over-year to $12.42 billion and $0.76, respectively. Moreover, it surpassed the EPS estimates in three of the trailing four quarters, which is promising.
The stock has gained 33.4% over the past year to close the last trading session at $85.89.
TJX'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 a B grade for Quality and Sentiment. It is ranked #5 out of 66 stocks in B-rated the Fashion & Luxury industry.
Click here to see the other ratings of TJX for Growth, Value, Momentum, and Stability.
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.
On August 10, 2023, TPR and Capri Holdings Limited (CPRI), a global fashion luxury group consisting of Versace, Jimmy Choo, and Michael Kors, announced that they had entered into a definitive agreement under which TPR will acquire Capri Holdings. Under the terms of the transaction Capri Holdings shareholders will receive $57.00 per share in cash for a total enterprise value of approximately $8.5 billion.
TPR's trailing-12-month gross profit margin of 69.92% is 97.5% higher than the 35.41% industry average. Its trailing-12-month net income margin of 13.51% is 222.3% higher than the 4.19% industry average.
TPR pays $1.20 annually as dividends which translates to a yield of 3.42% at the current price. Its four-year average dividend yield is 3.20%. 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 1.9% year-over-year to $1.66 billion. Its EPS is expected to increase 23.9% year-over-year to $0.97 for the same quarter. Also, it has surpassed EPS estimates in each of the trailing four quarters.
Shares of TPR have declined marginally over the past nine months to close the last trading session at $35.12.
TJX's strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
It has an A grade for Quality and a B for Growth. Within the same industry, it is ranked #4.
Beyond what is stated above, we've also rated TPR for Momentum, Value, Stability, and Sentiment. Get all TPR ratings here.
Chico's FAS, Inc. (CHS)
CHS operates as an omnichannel specialty retailer of women's private branded casual-to-dressy clothing, intimates, and complementary accessories. The company operates under the Chico's, White House Black Market (WHBM), and Soma brands.
On June 23, CHS unveiled a new share repurchase program authorized by its Board of Directors as part of its ongoing commitment to return value to its shareholders. This program allows the company to repurchase up to $100 million of its common stock.
CSH's trailing-12-month gross profit margin of 39.27% is 12.2% higher than the 35.41% industry average. Its trailing-12-month net income margin of 5.34% is 27.3% higher than the 4.19% industry average.
In the fiscal first quarter, which ended April 29, 2023, CHS' total net sales amounted to $534.74 million, while gross profit rose 3.9% from the year-ago value to $225.01 million. The company's net income came in at $39.91 million and $0.32 per share, up 14.2% and 14.3% from the prior-year quarter, respectively. In addition, its income from operations grew 17.5% from the year-ago value to $53.34 million.
CHS' revenue and EPS for the second quarter (ending July 31, 2023) are expected to be $554.90 million and $0.27, respectively. The company has an excellent earnings surprise history, surpassing the consensus EPS estimates in each of its trailing four quarters.
The stock has gained 13.1% over the past six months and 17.7% year-to-date to close the last trading session at $5.79.
It's no surprise that CHS has an overall rating of B, which equates to Buy in our proprietary rating system.
It has an A grade for Value and Quality. Within the same industry, it is ranked #6.
In addition to the POWR Ratings we've stated above, we also have CHS' ratings for Growth, Momentum, Stability, and Sentiments. Get all CHS ratings here.
What To Do Next?
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TJX shares were unchanged in premarket trading Monday. Year-to-date, TJX has gained 9.18%, versus a 17.41% 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.
The post Is There a Buying Opportunity with These 3 Luxury Stocks? appeared first on StockNews.com
