The fashion and luxury industry thrives on innovation, with the escalating influence of social media and digital platforms playing pivotal roles in its continuous evolution. Moreover, the sector’s unwavering commitment to excellence not only heightens consumer interest but also nurtures unwavering loyalty.
Against the backdrop, adopting a bullish stance on the shares of three fundamentally sound fashion and luxury companies, Lands' End, Inc. (LE), Movado Group, Inc. (MOV), and PVH Corp. (PVH) could be wise. However, before we jump into the fundamentals of these stocks, let’s briefly examine the industry dynamics first.
According to McKinsey's analysis of fashion forecasts, the luxury market segment is anticipated to generate the highest share of economic profit this year, with a projected global growth rate of 3% to 5%. Additionally, The U.S. market is expected to experience significant improvement in 2024, further bolstering a positive outlook.
Moreover, the fashion and luxury sector is poised for a substantial transformation this year, driven by the integration of generative AI. After achieving notable breakthroughs in 2023, generative AI is unveiling various use cases across the fashion industry, offering numerous advantages.
It plays a crucial role in improving customer satisfaction and enables online retailers to swiftly and cost-effectively introduce generative products to the market. The global generative AI in the fashion market is projected to hit $1.48 billion by 2032, demonstrating a robust CAGR of 36.9% from 2023 to 2032.
Furthermore, the increasing smartphone penetration and the advent of faster download speeds through the introduction of the 5G network have empowered numerous businesses to draw in wider audiences through online platforms and e-commerce channels.
In light of these positive developments, the global luxury fashion market is anticipated to reach a staggering $401.73 billion by 2028, growing at a CAGR of 6.1% spanning 2023 to 2028.
Keeping all these factors in mind, let’s now dive deeper into the fundamentals of the featured Fashion & Luxury stocks, beginning with the third choice.
Stock #3: Lands' End, Inc. (LE)
LE operates as a digital retailer of casual clothing, swimwear, outerwear, accessories, footwear, and home products internationally. It operates through U.S. eCommerce; International; Outfitters; Third Party; and Retail segments.
On January 4, 2024, LE unveiled an exclusive women’s swim collection at Target Corporation (TGT), comprising nearly 70 pieces, encompassing tops, bottoms, skirts, cover-ups, and bags. Priced between $36 and $70, the collection introduces new LE fabrics, prints, patterns, and colors, all maintaining the brand's renowned commitment to quality.
LE’s CEO Andrew McLean emphasized that collaborating with TGT to launch this exclusive collection is anticipated to significantly enhance the accessibility of their quality products in the retail space.
The stock’s trailing-12-month gross profit margin of 40.50% is 14.5% higher than the 35.38% industry average. Likewise, its trailing-12-month asset turnover ratio of 1.38x is 39.3% higher than the industry average of 0.99x. Furthermore, LE’s trailing-12-month levered FCF margin of 5.85% is 8.3% higher than the industry average of 5.40%.
For the fiscal third quarter, which ended on October 27, 2023, LE’s net revenue amounted to $324.74 million, while its gross profit increased 2.8% from the year-ago value to $152.59 million. In addition, its adjusted EBITDA came in at $17.28 million, up 3.7% from the prior-year quarter.
During the same quarter, the company’s cash and cash equivalents stood at $36.82 million, increasing 27.7% compared to $28.83 million as of October 28, 2022.
Analysts predict LE’s revenue and EPS for the fiscal fourth quarter (ending January 2024) to be $502.71 million and $0.22, respectively. Moreover, its EPS is forecasted to improve by 20% per annum over the next five years.
Over the past three months, LE’s shares have surged 26.4% to close the last trading session at $8.68.
LE’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, translating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Growth, Value, and Sentiment. In the B-rated 62 stock Fashion & Luxury industry, it is ranked #15. Click here to see LE’s ratings for Momentum, Stability, and Quality.
Stock #2: Movado Group, Inc. (MOV)
MOV designs, sources, markets, and distributes watches worldwide. The company operates in two segments, Watch and Accessory Brands; and Company Stores.
On September 19, 2023, MOV introduced its new worldwide campaign, "Connecting The Dots," showcasing individuals consistently on the move while wearing MOV watches in their daily lives. The campaign seeks to establish connections between MOV’s legacy, current endeavors, and future aspirations by highlighting the brand's enduring commitment to innovation and heritage.
The stock’s trailing-12-month gross profit margin of 55.71% is 57.5% higher than the 35.38% industry average. Likewise, its trailing-12-month EBIT margin of 9.86% is 29.8% higher than the industry average of 7.60%. Furthermore, MOV’s trailing-12-month net income margin of 8.34% is 82.7% higher than the industry average of 4.56%.
In the fiscal third quarter, which ended on October 31, 2023, MOV’s net sales amounted to $187.69 million. During the same quarter, the company’s non-GAAP attributable net income and non-GAAP EPS came in at $17.68 million and $0.78, respectively.
Also, its cash and cash equivalents stood at $200.97 million, up 7.7% compared to $186.67 million as of October 31, 2022.
Street expects MOV’s revenue and EPS for the fiscal fourth quarter (ending January 2024) to come in at $174.80 million and $0.39, respectively. Furthermore, its EPS is projected to improve by 15% per annum over the next five years.
The company has an excellent earnings surprise history, surpassing the EPS estimates in each of the trailing four quarters.
The stock has gained 3.4% over the past six months to close the last trading session at $27.94.
MOV’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 a B grade for Value and Quality. Within the same B-rated industry, it is ranked #10. Click here to see the other ratings of MOV for Growth, Momentum, Stability, and Sentiment.
Stock #1: PVH Corp. (PVH)
PVH operates as an apparel company in the United States and internationally. The company 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.
On December 20, 2023, PVH paid its shareholders a quarterly dividend of $0.04 per share. The company’s annual dividend of $0.15 translates to a 0.13% yield on the prevailing prices, while its four-year average dividend yield is 0.14%. Its dividend payouts have grown at a CAGR of 25.9% over the past three years.
PVH’s trailing-12-month gross profit margin of 56.99% is 61.1% higher than the 35.38% industry average. Likewise, its trailing-12-month cash per share of $5.97 is 157.4% higher than the industry average of $2.32. Furthermore, the stock’s trailing-12-month net income margin of 5.76% is 26.1% higher than the industry average of 4.56%.
For the fiscal third quarter, which ended on October 29, 2023, PVH’s total revenue increased 3.6% year-over-year to $2.36 billion, while its gross profit rose 5.1% from the year-ago value to $1.34 billion.
Moreover, the company’s non-GAAP net income and non-GAAP net income per share amounted to $176.40 million and $2.90, up 4.1% and 11.5% from the prior-year quarter, respectively.
The consensus EPS estimate of $10.46 for the fiscal year ending January 2024 reflects a 16.7% year-over-year improvement. While the consensus revenue estimate of $9.14 billion for the same period indicates a 1.2% year-over-year rise.
Additionally, the company surpassed its revenue estimates in three of the trailing four quarters and EPS estimates in each of the trailing four quarters, which is impressive.
PVH’s shares soared 67.9% over the past three months to close the last trading session at $119.96.
It’s no surprise that PVH has an overall rating of B, which equates to Buy in our proprietary rating system. It has a B grade for Growth and Value. Out of 62 stocks in the same industry, it is ranked #7.
In addition to the POWR Ratings we’ve stated above, we also have PVH’s ratings for Momentum, Stability, Sentiment, and Quality. Get all PVH ratings here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
PVH shares were trading at $118.05 per share on Tuesday afternoon, down $1.91 (-1.59%). Year-to-date, PVH has declined -3.33%, versus a -0.24% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Mukherjee
Anushka's ultimate aim is to equip investors with essential knowledge that empowers them to make well-informed investment choices and attain sustained financial prosperity in the long run.
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