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With Americans refreshing their wardrobes, thanks to the resumption of active social lifestyle, events and occasions, apparel companies have been witnessing resurgence in demand. Impressively, sales at clothing & clothing accessories stores have been increasing as more people venture out. The impact of this trend is likely to get reflected in the top line of apparel companies this earnings season. Surely, pandemic-relief package and stepped-up vaccinations played a major role in boosting consumer confidence.
Per the Commerce Department, sales at clothing & clothing accessories stores grew 200.2% and 47.1% year over year during the months of May and June, respectively. Well, players in the apparel space have been leaving no stone unturned to tap any surge in demand.
Industry participants have been focusing on deepening engagements with consumers, creating innovative and compelling products, and enhancing digital and data analytics capabilities. Launch of newer styles, customization options and refreshed store environments allowed them to resort to full price instead of markdowns, which in turn helped boost revenues. Growing consumer interest in a healthy lifestyle and rise in the athleisure clothing trend have been lending support.
Companies have been emphasizing on membership programs, upgradation of store technology, shopping via mobile app and last mile delivery solutions. Expedited delivery services like doorstep delivery, curbside pickup or buy online and pick up at store as well as contactless payment gateway have been aiding in maximizing share of customers’ wallet.
While aforementioned factors raise optimism about the outcome of the results, margins remain an area to watch. Impact of investments to increase teams’ pay and benefits, and expenses on additional safety and cleansing measures due to the coronavirus pandemic on margins cannot be ruled out. Apart from these, any deleverage in SG&A rate, higher labor and occupancy costs, and increased marketing expenses might have weighed on margins.
Making the Perfect Choice
Our research shows that for stocks with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), the chance of a positive earnings surprise is as high as 70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
5 Prominent Picks
You may consider Foot Locker, Inc. FL, which operates as an athletic footwear and apparel retailer. The stock has a Zacks Rank #2 and an Earnings ESP of +7.06%. The Zacks Consensus Estimate for its second-quarter fiscal 2021 earnings is pegged at $1.09, which suggests an improvement of 53.5% from the prior-year quarter. The Zacks Consensus Estimate for its quarterly earnings has moved up by 2.8% in the past 60 days. The company has a trailing four-quarter earnings surprise of 47.6%, on average. Foot Locker has been witnessing strong demand for athleisure and fitness products. It has been actively investing toward reinforcing digital presence as well as revamping and remodeling of store fleet. Sturdy growth in the online arena and strong omni-channel offerings has been fueling growth in the direct-to-consumer channel. These are likely to get reflected in the upcoming quarterly results. You can see the complete list of today’s Zacks #1 Rank stocks here.
Foot Locker, Inc. Price, Consensus and EPS Surprise
Foot Locker, Inc. price-consensus-eps-surprise-chart | Foot Locker, Inc. Quote
Capri Holdings Limited CPRI, with a Zacks Rank #3 and an Earnings ESP of +3.87%, is a solid bet. The Zacks Consensus Estimate for its first-quarter fiscal 2022 earnings is pegged at 79 cents, which suggests a sharp turnaround from a loss of $1.04 per share reported in the year-ago period. The consensus mark for earnings has moved up by 3.9% in the past 30 days. The bottom line of this marketer, distributor and retailer of branded women's and men's apparel, footwear, and accessories outperformed the Zacks Consensus Estimate by a significant margin in the last reported quarter. Management in a recent virtual investor day highlighted that Capri Holdings witnessed better-than-anticipated first-quarter sales trends. In fact, its three iconic fashion houses — Michael Kors, Versace and Jimmy Choo — are doing quite well. The company has been deploying resources to expand product offerings and upgrade distribution infrastructure. This along with fleet optimization and e-commerce enhancement bode well. The company is slated to announce results on Jul 30.
Capri Holdings Limited Price, Consensus and EPS Surprise
Capri Holdings Limited price-consensus-eps-surprise-chart | Capri Holdings Limited Quote
Under Armour, Inc. UAA deserves a mention. The stock has a Zacks Rank #3 and an Earnings ESP of +47.69%. The Zacks Consensus Estimate for its second-quarter 2021 earnings is pegged at 5 cents, which suggests a meaningful improvement from a loss of 31 cents a share reported in the year-ago period. The consensus mark for earnings has moved up by a penny in the past 60 days. This developer, marketer and distributor of branded performance apparel, footwear and accessories has a trailing four-quarter earnings surprise of 286%, on average. The company’s strategy of improving sales through product innovation, investments in own stores, acceleration of e-commerce capabilities and selling more inventory at full price is likely to have aided the to-be-reported quarter’s performance. The company is scheduled to release results on Aug 3.
Under Armour, Inc. Price, Consensus and EPS Surprise
Under Armour, Inc. price-consensus-eps-surprise-chart | Under Armour, Inc. Quote
V.F. Corporation VFC, with a Zacks Rank #3 and an Earnings ESP of +19.12%, is worth betting on. The Zacks Consensus Estimate for its first-quarter fiscal 2022 earnings is pegged at 11 cents, suggesting an improvement from a loss of 57 cents reported in the prior-year quarter. The consensus mark for earnings has increased by a penny over the past seven days. This apparel, footwear and accessories company has a trailing four-quarter earnings surprise of 9.7%, on average. The company’s sturdy e-commerce business and robust sales across all regions and channels are likely to have contributed to the quarterly performance. The company has been benefiting from strong business performance in the digital channel and across China. The company is slated to announce results on Jul 30.
V.F. Corporation Price, Consensus and EPS Surprise
V.F. Corporation price-consensus-eps-surprise-chart | V.F. Corporation Quote
Investors can even count on Ralph Lauren Corporation RL, designer, marketer and distributor of lifestyle products, with a Zacks Rank #3 and an Earnings ESP of +2.89%. The Zacks Consensus Estimate for its first-quarter fiscal 2022 earnings stand at 87 cents, indicating an improvement from a loss of $1.82 reported in the year-ago period. The Zacks Consensus Estimate for quarterly earnings has risen by a penny in the past 30 days. The company has a trailing four-quarter earnings surprise of 47.4%, on average. It is scheduled to release results on Aug 3. Accelerating digital capabilities, enhanced marketing efforts, cost-savings plans and reduction in structural headwinds are likely to have contributed to quarterly growth.
Ralph Lauren Corporation Price, Consensus and EPS Surprise
Ralph Lauren Corporation price-consensus-eps-surprise-chart | Ralph Lauren Corporation Quote
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