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4 Lucrative Stocks to Buy from the Textile - Apparel Universe

Vrishali Bagree

The Zacks Textile – Apparel industry, which comprises companies manufacturing, designing and marketing basic and fashion apparel, footwear and accessories, appears to be a favorite spot for investment. Notably,  the industry, which forms part of the Consumer Discretionary sector, is currently among the top 24% (62 of 255) of all Zacks industries. Further, the space has rallied 15.1% on a year-to-date basis.

The impressive run can be attributed to the solid performance of the industry participants, which in turn is being buoyed by strategic growth activities. To this end, the industry participants are gaining from effective marketing strategies, licensing deals, buyouts, innovation and alliances. Focus on keeping pace with changing consumer preferences is also a key catalyst. In this regard, rising inclination toward health and fitness is working in favor of activewear and sporting equipment providers.

Additionally, we commend textile-apparel companies’ strong digital endeavors like upgraded payment systems, online purchases and pick-up facility at stores and improved e-commerce sites, among others. Although costs related to digital investments may hurt margins, diligent cost-containment efforts will offset it to a certain extent. This apart, companies are benefiting from their international presence, especially in underpenetrated markets like Asia and Europe. Although the U.S.-China trade war and tariff impacts pose threats to these companies, favorable consumer environment and the aforementioned growth plans is likely to back the performance of players in the textile-apparel universe.

Moreover, encouraging outlook by some of the companies in the industry reflects their solid confidence in their prospects. All said, we have picked a few textile-apparel players, which possess a favorable Zacks Rank and hold promising prospects.

4 Textile-Apparel Stocks You Must Have

We suggest investing in Delta Apparel, Inc. DLA, which has long-term earnings per share growth rate of 15%. This manufacturer of knitwear products has delivered an average positive earnings surprise of 34.5% in the trailing four quarters. Notably, this Zacks Rank #1 stock has gained 36.1% so far this year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Columbia Sportswear Company COLM is also a solid bet. This Zacks Rank #2 (Buy) company has rallied 14.3% this year, backed by its impressive earnings surprise history. Notably, this designer, marketer and distributor of active outdoor apparel and footwear has delivered positive earnings and sales surprise for 26 and 10 consecutive quarters, respectively. Columbia Sportswear has been gaining from its strong direct-to-consumer business, robust international presence, brand enhancement efforts and Project CONNECT. These positives encouraged management to raise 2019 earnings view in the last reported quarter. The company currently has long-term earnings per share growth rate of 11.2%.

Investors should also take a look at lululemon athletica inc. LULU, which marked its 10th and 15th consecutive earnings and sales beat, respectively, in second-quarter fiscal 2019. This is clearly the reason behind this Zacks Rank #2 company’s year-to-date rally of 59.2%. Well, this yoga-inspired athletic apparel company has been steered by focus on product innovation, expanding digital business, international expansion and Power of Three strategy. Driven by favorable second-quarter results, the company provided an encouraging view for the third quarter and raised guidance for fiscal 2019. lululemon’s long-term earnings per share growth rate stands at 18.2%.

Further, investors can count on V.F. Corporation VFC, which is one of the world's largest apparel, footwear and accessories companies. The company has displayed a robust earnings surprise trend with earnings and sales topping estimates for six and five straight quarters, respectively. This can be attributable to the company’s focus on digital growth, international expansion and Vans brand among other factors. To top it, management raised earnings view for fiscal 2020, when it reported first-quarter results. This Zacks Rank #2 company has rallied 32% year to date.

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lululemon athletica inc. (LULU) : Free Stock Analysis Report
 
V.F. Corporation (VFC) : Free Stock Analysis Report
 
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