Are you looking for apparel and retail stocks to buy for the long haul?
If so, you might want to spend less time checking out the Victoria’s Secret’s of the world and focus on companies winning with menswear.
Menswear is hot. So hot, experts expect women’s clothing to take a backseat over the next few years with men taking center stage for the first time in a long while.
Gartner L2, a company that specializes in business intelligence, suggests that within two years, men’s clothing will be growing at a faster pace than women’s clothing. Another business intelligence firm, Euromonitor International, expects men’s clothing to outpace women’s clothing for the next years, perhaps longer.
“Fashion has always been about women but men are finally having their time,” Lizzy Bowring, catwalk director at trend-forecasting agency WSGN, told Business Insider. “It’s the younger men that are driving the push for menswear. These men are more savvy and aware, and there is a lot of competition to look the part.”
Just because younger men want to look better, it doesn’t mean they always want to walk around in a suit. This means investors can’t make assumptions about which companies will win the battle for the male shopper.
With that in mind, here are seven stocks to buy that cover the entire spectrum of menswear.
Retail Stocks to Buy: LVMH (LVMUY)
If you only can buy one stock that should benefit in the trend toward menswear, I believe LVMH (OTCMKTS:LVMUY) is an excellent choice because of its diversification.
While LVMH — the owner of Louis Vuitton — does a lot of business with women, it also has an interesting array of brands that are focused on the male consumer. Whether it be shirtmaker Pink, watchmaker Tag Heuer, yachtmaker Royal Van Lent, or whiskey maker Glenmorangie, there’s something for every taste and price point.
Furthermore, if there’s one thing I know about CEO Bernard Arnault, one of the five richest people on the planet, it’s that he can spot a trend a mile away and then capitalize on it.
I know it is over-the-counter, which makes it tough to purchase, but owning this stock will make you a lot of money over the long haul, even if its various fashion houses don’t move further into menswear.
Retail Stocks to Buy: VF (VFC)
Source: Andy Via Flickr
Although the apparel conglomerate is in the process of spinning off its Lee and Wrangler jeans business — which generated $2.5 billion in revenue in its most recent annual report and tends to focus on a male customer — VF (NYSE:VFC) has plenty of other businesses catering to men.
While all three of VFC’s major brands: Vans, The North Face and Timberland, appeal to both men and women, the fact that research shows menswear is expected to lead the way over the next few years can make sure each of those businesses will bring plenty to market for its male customers in that time.
That’s especially true for Vans, the company’s hot footwear brand, that grew sales by 26% in the second quarter. Once dying on the vine, it’s a brand in revival mode.
“For the first time in years, we’ve seen Nike share moderate as a preferred brand,” senior research analyst Erin Murphy said in a statement last May. “Offsetting this weakness, we’ve seen an unexpected rise in trends like streetwear with Vans and Supreme gaining momentum.”
As VF continues to tweak its apparel portfolio, I’d be surprised if it didn’t make a reasonably sizable acquisition in the next 12 months — one that caters to a male audience.
Retail Stocks to Buy: Lululemon (LULU)
When Lululemon (NASDAQ:LULU) came out with its ambitious plan for growth in early 2016, investors were skeptical it could achieve them. One of the goals set by then CEO Laurent Potdevin was to reach $1 billion in sales for its men’s line by 2020. That went along with plans to reach $4 billion in global sales and $1 billion in e-commerce revenue.
When the company first started out on its five-year plan, men’s clothing was just beginning to gain traction. Now, it represents approximately 22% of the company’s overall revenue, and its quarterly growth continues to accelerate with the company admitting in its most recent conference call that the line would hit $1 billion in revenue before the end of 2020.
As I stated in my most recent article about Lululemon, the only thing that stands in the way of LULU reaching all of its goals for 2020 is a recession in 2019. Since that’s unlikely — despite the president’s best efforts — it remains one of my favorite stocks to buy for this year and beyond.
Retail Stocks to Buy: Oxford Industries (OXM)
Unless you follow the apparel industry closely, you likely haven’t heard of this Atlanta-based company, but you likely have heard of one or more of its three main brands: Tommy Bahama, Lilly Pulitzer, and Southern Tide.
I came to follow Oxford Industries (NYSE:OXM) when it acquired Southern Tide in 2016 for $85 million. I had stumbled onto the men’s sportswear brand a couple of years before the acquisition. I liked the look of its clothing; not to mention its Skipjack logo was different from all the other animals and mammals that are stuck on golf shirts to make them look preppy.
Anyway, the company’s latest quarterly report might not have gotten investors all revved up — its Q3 2018 earnings announced in December were $0.14 a share, three cents shy of the consensus estimate and three cents lower than a year earlier with revenues that also missed analyst expectations — but with menswear ready to take a front seat in the apparel business in 2019 and beyond, Southern Tide and Tommy Bahama make a pretty good one, two punch.
When you consider that it’s got a PEG ratio of 9.1, 100 basis points less than Lululemon, anywhere below $75 is growth at a reasonable price.
Retail Stocks to Buy: Columbia Sportswear (COLM)
Like a lot of the businesses I’ve recommended as stocks to buy to take advantage of the menswear boom, Columbia Sportswear (NASDAQ:COLM) sells a lot of apparel and footwear to both sexes.
A majority of the company’s sales are generated by its legacy Columbia brand with smaller contributions from prAna, Sorel, and Mountain Headwear. The three other brands were all acquisitions: Mountain Headwear was acquired in 2003 for $36 million including debt; Sorel was bought out of bankruptcy in 2012 for $8 million, and prAna was acquired in 2014 for $190 million.
In the company’s most recent third-quarter report, the three smaller brands generated $155 million with Columbia delivering $641 million in sales. While there’s no question that Columbia drives its business — Q3 2018 revenues grew by 8% on a constant currency basis — the Sorel business got the company into footwear at a very reasonable price; in fiscal 2017, Sorel’s revenues grew 6% year over year to $229 million. In the latest quarter, Sorel’s sales grew 13% on a constant currency basis.
Although COLM is down 1.6% year to date through January 16, it’s got a streak going of seven consecutive years of calendar-year gains; providing investors with very consistent returns over to
Retail Stocks to Buy: Zumiez (ZUMZ)
Although the action-sports apparel retailer sells both men’s and women’s clothing, Zumiez (NASDAQ:ZUMZ) generates a large chunk of its revenue from one specific category. 41% of revenue came from men’s clothing in 2017 — with accessories (18%), footwear (16%), women’s apparel (14%) and hardgoods (11%) accounting for the rest.
One of the few companies left to report monthly same-store sales, Zumiez grew December comps by 4.9%; that’s on top of 7.9% same-store sales growth a year earlier for a two-year average of 6.4%.
As a result of its strong December sales, Zumiez upped its Q4 2018 guidance on January 9, and now expects 3% same-store sales growth in Q4, up from its previous estimate of 0%-2%. In addition, it raised the bottom-end of its EPS guidance by six cents and its top-end projection by two cents to $1.10 a share.
At the top end of earnings, Zumiez will have grown Q4 2018 earnings per share by 38% compared to a year earlier.
With all the success of action sports brands like Vans, investors can expect more good news from Zumiez in fiscal 2019.
Retail Stocks to Buy: Foot Locker (FL)
2018 was an interesting year for Foot Locker (NYSE:FL) stock. It recovered from a precipitous drop in 2017 that saw the company’s value cut by 61% between May and November and delivered a total return of 16% this past year.
Up 6% year-to-date through January 16, it looks as though Foot Locker stock has some momentum heading into the remainder of 2019.
“We feel really great about the growth in digital as we’ve stressed continuously in our prepared remarks, but we also mentioned the increase on the wholesale side beyond expectations there,” Nike CEO Mark Parker stated in December discussing the company’s Q2 2019 results. “And I think that’s driven by the elevation of the experience . . . particularly with Foot Locker and [Dick’s Sporting Goods] for example.”
It’s always good when your biggest supplier calls you out for the work you’re doing to sell its products. No wonder Foot Locker CEO Richard Johnson is enthusiastic about its holiday selling season and fourth quarter overall.
Foot Locker reports Q4 2018 earnings in late February. Expect them to be very healthy with positive guidance for fiscal 2019 also likely in the cards
As of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
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