Despite the macroeconomic challenges, the luxury goods industry is well-positioned for growth, thanks to the rise of online shopping and social media's strong influence on fashion trends, expanding the reach and accessibility of luxury brands worldwide.
Considering these factors, it could be wise to buy fundamentally strong luxury goods stocks: Oxford Industries, Inc. (OXM), Guess?, Inc. (GES), and J. Jill, Inc. (JILL).
Before delving deeper into their fundamentals, let’s discuss why the luxury goods industry is well-positioned for growth.
During the pandemic, the luxury goods industry thrived while other sectors struggled. It expanded profit margins despite the economic challenges. The rise of social media and digital platforms contributed significantly to the growing global demand for luxury goods.
The global luxury goods market is expected to reach $392.40 billion by 2030, growing at a CAGR of 4.7%. This growth can be attributed to factors such as increasing disposable income, changing consumer preferences, and the widespread adoption of online shopping platforms.
Similarly, the global luxury fashion market is projected to reach $294.70 billion by 2028, growing at a CAGR of 3.6%. Various factors influence luxury fashion, including social media campaigns and celebrity endorsements. Furthermore, AI is reshaping the fashion industry, enhancing customer experiences with chatbots, personalized recommendations, and trend predictions.
Considering these conducive trends, let’s analyze the fundamentals of the three Fashion & Luxury industry picks, beginning with the third choice.
Stock #3: Oxford Industries, Inc. (OXM)
OXM is an apparel company that designs, sources, markets, and distributes products of lifestyle and other brands worldwide. The company offers its products under the Tommy Bahama, Lilly Pulitzer, and Southern Tide brands.
In terms of the trailing-12-month net income margin, OXM’s 10.53% is 140.2% higher than the 4.38% industry average. Its 14.02% trailing-12-month EBIT margin is 90.6% higher than the 7.36% industry average. Likewise, the stock’s 14.06% trailing-12-month Return on Total Assets is 261.1% higher than the 3.89% industry average.
For the second quarter that ended July 29, 2023, OXM’s net sales increased 15.7% year-over-year to $420.32 million. Its adjusted gross profit increased 15% year-over-year to $270.20 million. The company's adjusted net earnings stood at $55.10 million. In addition, its adjusted net earnings per share came in at $3.45.
Street expects OXM’s revenue for the quarter ending October 31, 2023, to increase 4.5% year-over-year to $327.11 million. Its EPS for the quarter ending April 30, 2024, is expected to increase 2% year-over-year to $3.85. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has declined 1.5% to close the last trading session at $89.88.
OXM’s strong prospects are reflected in its POWR Ratings. It has an overall rating of B, equating 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 Value and Quality. It is ranked #23 out of 63 stocks in the B-rated Fashion & Luxury industry. Click here to see OXM’s Growth, Momentum, Stability, and Sentiment ratings.
Stock #2: Guess?, Inc. (GES)
GES designs, markets, distributes, and licenses lifestyle collections of apparel and accessories for men, women, and children. It operates through five segments: Americas Retail, Americas Wholesale, Europe, Asia, and Licensing.
In terms of the trailing-12-month Return on Common Equity, GES’ 31.87% is 179.7% higher than the 11.39% industry average. Its 5.82% trailing-12-month Return on Total Assets is 49.5% higher than the 3.89% industry average. Likewise, the stock’s 8.39% trailing-12-month Return on Total Capital is 37.4% higher than the 6.11% industry average.
GES’ net revenues for the fiscal second quarter that ended July 29, 2023, increased 3.4% year-over-year to $664.51 million. Its gross profit rose 8.9% year-over-year to $294.44 million. Its adjusted net earnings attributable to GES rose 73.6% year-over-year to $39.71 million. Additionally, its adjusted EPS stood at $0.72, representing an increase of 84.6% year-over-year.
Analysts expect GES’ EPS and revenues for the quarter ending October 31, 2023, to increase 40.6% and 3.6% year-over-year to $0.62 and $655.97 million, respectively. It surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 35.8% to close the last trading session at $21.19.
GES’ strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.
It has a B grade for Growth and Value. Within the same industry, it is ranked #16. To see GES’ Momentum, Stability, Sentiment, and Quality ratings, click here.
Stock #1: J. Jill, Inc. (JILL)
JILL operates as an omnichannel retailer of women's apparel. It offers casual wear, athletic wear, loungewear, footwear, and accessories like scarves and jewelry. The company distributes its products through retail stores, an online platform, and catalogs.
On September 14, 2023, JILL announced the launch of a limited-edition capsule collection called Wearever Works, designed to provide comfort, tailoring, and versatility for women in various aspects of their lives.
JILL’s President and CEO Claire Spofford expressed excitement about the collection's versatility and how it aligns with women's seasonal wardrobe needs, emphasizing their commitment to meeting customer preferences.
In terms of the trailing-12-month EBIT margin, JILL’s 13.52% is 83.7% higher than the 7.36% industry average. Likewise, its 69.50% trailing-12-month gross profit margin is 95.8% higher than the industry average of 35.50%. Furthermore, the stock’s 812.14% trailing-12-month Return on Common Equity is significantly higher than the industry average of 11.39%.
For the fiscal second quarter ended July 29, 2023, JILL’s net sales came in at $155.67 million. Its gross profit came in at $111.41 million. The company’s adjusted income from operations came in at $28.09 million. Also, its adjusted EBITDA stood at $34.55 million.
In addition, its adjusted net income and EPS came in at $15.81 million and $1.10, respectively.
For the quarter ending January 31, 2024, JILL’s EPS and revenue are expected to increase 27.3% and 1.6% year-over-year to $0.14 and $150 million, respectively. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 57% to close the last trading session at $27.98.
It’s no surprise that JILL has an overall rating of A, which translates to a Strong Buy in our proprietary POWR Ratings system. It also has an A grade for Sentiment and Quality. It is ranked #2 in the Fashion & Luxury industry.
In total, we rate JILL on eight different levels. Beyond what we stated above, we also have given JILL grades for Growth, Value, Momentum, and Stability. Get all the JILL ratings here.
What To Do Next?
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OXM shares were trading at $92.52 per share on Monday afternoon, up $2.64 (+2.94%). Year-to-date, OXM has gained 1.80%, versus a 15.33% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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