While the resurgence of COVID-19 cases and the inflationary environment are of concern to investors regarding the pace of economic recovery, rising discretionary spending makes the prospects bright for apparel companies. Prominent companies in this space—PVH Corp. (PVH), Urban Outfitters (URBN), and Shoe Carnival (SCVL)—reported their quarterly results last week, surpassing consensus EPS estimates. We expect shares of these companies to soar in price on fundamental strength and industry tailwinds. So, let’s take a closer look at these names.
Even though U.S. consumer confidence fell to a six-month low in August due to the resurgence of COVID-19 cases and high inflation, the major stock market indexes are hovering near their all-time highs. This can be, in part, attributed to the solid second-quarter corporate earnings results.
According to a FactSet research report, more S&P 500 companies beat the EPS estimates in the second quarter than on average. Also, the S&P 500 and Nasdaq hit record highs last week on easing concerns about the Fed’s tapering activities.
The apparel industry has been benefiting from rising discretionary spending and increasing online and brick-and-mortar sales. So, we think it could be wise to bet on quality apparel stocks PVH Corp. (PVH), Urban Outfitters, Inc. (URBN), and Shoe Carnival, Inc. (SCVL). These companies reported impressive quarterly results last week, beating the consensus earnings estimates.
PVH Corp. (PVH)
Apparel company PVH in New York City operates through six segments: Tommy Hilfiger North America; Tommy Hilfiger International; Calvin Klein North America; Calvin Klein International; Heritage Brands Wholesale; and Heritage Brands Retail. It designs, markets, and retails men's, women's, and children's apparel and accessories.
PVH announced the completion of the sale of specific intellectual property and other assets of its Heritage Brands business to Authentic Brands Group on August 3. Stefan Larsson, the company’s CEO, said, "PVH is entering a new growth chapter, executing against our accelerated recovery priorities and with a clear focus on unlocking the full potential of our iconic, global growth brands, Calvin Klein and TOMMY HILFIGER.”
PVH’s revenue surged 46.3% year-over-year to $2.31 billion in the second quarter ended August 1, 2021. Its gross profit grew 51% year-over-year to $1.33 billion. Its non-GAAP net income was $197.50 million, representing a 1,957.3% year-over-year increase. Also, its non-GAAP EPS came in at $2.72, up 1,992.3% year-over-year.
Analysts expect PVH’s EPS and revenue to increase 442.6% and 25.5%, respectively, year-over-year to $6.75 and $8.95 billion in its fiscal year 2022. In addition, it surpassed the Street’s EPS estimates in three of the trailing four quarters. The stock has gained 77.7% in price over the past year to close yesterday's trading session at $112.70.
PVH’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has a B grade for Growth, Momentum, and Sentiment. In addition, within the A-rated Fashion & Luxury industry, PVH is ranked #26 of 64 stocks. Click here to see the additional POWR Ratings for PVH (Value, Quality, and Stability).
Urban Outfitters, Inc. (URBN)
URBN retails and wholesales general consumer products. The Philadelphia, Pa., company operates through three segments: Retail; wholesale; and Subscription. In addition, it operates 247 Urban Outfitters, 237 Anthropologie Group, 149 Free People stores, and 11 restaurants.
URBN introduced Nuuly Thrift on August 24. It is a resale marketplace that will be launched in fall 2021, where anyone can buy or sell women's, men's, and kids' apparel and accessories. Richard A. Hayne, the company’s CEO and Chairman said, “With the launch of Nuuly Thrift, we’re excited for URBN to capitalize on shifting customer behavior and gain market share in the rapidly expanding online resale market.”
URBN’s net sales surged 44.1% year-over-year to $1.16 billion for the second quarter, ended July 31, 2021. Its income from operations grew 138.9% year-over-year to $165.85 million. Its net income came in at $127.26 million, representing a 269.9% year-over-year increase. In addition, its EPS was $1.28, up 265.7% year-over-year.
For its fiscal year 2022, analysts expect URBN’s EPS and revenue to increase 31,900% and 30.1%, respectively, year-over-year to $3.20 and $4.49 billion. In addition, it surpassed the consensus EPS estimates in each of the trailing four quarters. The stock has soared 30.4% in price over the past year to close yesterday’s trading session at $31.83.
URBN’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has an A grade for Momentum, and a B grade for Value, Sentiment, and Quality.
Shoe Carnival, Inc. (SCVL)
SCVL is a family footwear retailer in the United States that offers various dresses, casual, and athletic footwear products for men, women, and children. The Evansville, Ind.-based company operates 383 stores in 35 states and Puerto Rico. In addition, it sells its products through online shopping at shoecarnival.com and mobile applications.
On June 22, SCVL’s board of directors authorized a two-for-one stock split of its common stock. Cliff Sifford, SCVL’s Vice Chairman and CEO said, “The Board’s approval of this stock split along with the recent dividend increase, further underscores its confidence in Shoe Carnival’s long-term growth trajectory.”
SCVL’s net sales surged 10.4% year-over-year to $332.23 million in its fiscal second quarter ended July 31, 2021. Its total assets grew 13.7% year-over-year to $784.06 million. Its net income came in at $44.21 million, representing a 339.5% year-over-year increase. And its EPS was $1.54, up 340% year-over-year.
SCVL’s EPS and revenue are expected to increase 701.8% and 25.8%, respectively, year-over-year to $4.49 and $1.23 billion in fiscal 2022. In addition, it surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 90.1% in price over the past year to close yesterday’s trading session at $35.04.
It’s no surprise that SCVL has an overall A rating, which equates to Strong Buy in our POWR Rating system. The stock also has an A grade for Momentum, and a B grade for Growth, Value, Quality, and Sentiment.
PVH shares were unchanged in premarket trading Wednesday. Year-to-date, PVH has gained 20.03%, versus a 21.54% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
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