The luxury goods market is expected to expand as disposable income rises, social media influence grows, and demand for high-end products and status symbols increases. Therefore, it could be wise to own fundamentally strong luxury stocks Burberry Group plc (BURBY), Lands’ End, Inc. (LE) and Ross Stores, Inc. (ROST).
Before delving deeper into their fundamentals, let’s discuss what’s happening in the luxury industry.
The luxury goods industry is thriving as a result of global demand, changing client preferences, millennial popularity, disposable incomes, exclusivity, e-commerce growth, and collaborations with influencer. Luxury products have become more accessible because of social media, internet platforms, and the preferences of millennials.
The US luxury goods market is expected to grow at a CAGR of 5.1% until 2027. The wealthy, high-income population in the United States is a large consumer of luxury goods. The country’s established network of shops and curated fashion stores meet this need, offering a varied choice of regional and global luxury brands.
According to IMARC Group, the global luxury fashion market will be worth $327.10 billion by 2032, growing at a CAGR of 3.1%, driven by rising affluence, a desire for exclusivity, strong branding, the growing importance of social media, and rapid globalization.
Considering these conducive trends, let’s take a look at the fundamentals of the three best Fashion & Luxury stocks, starting with number three.
Stock #3: Burberry Group plc (BURBY)
Headquartered in London, the United Kingdom, BURBY manufactures, retails, and wholesales luxury goods under the Burberry brand. The company operates in two segments: Retail/Wholesale and Licensing.
BURBY’s trailing-12-month levered FCF margin of 19.79% is 255.9% higher than the industry average of 5.56%. Its trailing-12-month ROCE of 34.54% is 203.7% higher than the industry average of 11.37%.
For the six-month period, which ended on September 30, 2023, BURBY’s revenue increased 3.8% year-over-year to £1.39 billion ($1.73 billion), while its profit for the period and EPS stood at £159 million ($198.12 million) and 42.4p. Also, its gross profit rose 3.4% from the year-ago value to £975 million ($1.21 billion).
Analysts expect BURBY’s revenue to come in at $3.75 billion for the year ending March 2024. Its EPS is expected to come in at $1.08 for the same period. The stock has gained marginally over the past month to close the last trading session at $16.87.
BURBY’s POWR Ratings reflect this promising outlook. The stock 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.
BURBY has a B grade for Stability and Quality. Within the B-rated Fashion & Luxury industry, it is ranked #21 out of 62 stocks. To see additional POWR Ratings for Growth, Value, Momentum and Sentiment for BURBY, click here.
Stock #2: 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.
LE’s trailing-12-month gross profit margin of 40.50% is 13.2% higher than the 35.77% industry average. Its trailing-12-month levered FCF margin of 5.85% is 5.2% higher than the 5.56% industry average.
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.
The consensus revenue came in at $1.43 billion for the fiscal year ending January 2025. Its EPS is expected to grow 28.2% for the same period. LE’s shares have gained 39.6% past three months to close the last trading session at $9.77.
It’s no surprise that LE has an overall B rating, equating to a Buy in our POWR Ratings system. It has a B grade for Growth, Value and Sentiment. It is ranked #15 in the same industry.
Beyond what is stated above, we’ve also rated LE for Stability, Momentum and Quality. Get all LE ratings here.
Stock #1: Ross Stores, Inc. (ROST)
ROST and its subsidiaries operate off-price retail apparel and home fashion stores under the Ross Dress for Less and dd’s DISCOUNTS brand names in the United States. Their stores primarily offer apparel, accessories, footwear, and home fashions.
ROST’s trailing-12-month ROTA of 12% is 185.7% higher than the industry average of 4.20%. Its trailing-12-month ROCE of 39.22% is 244.9% higher than the industry average of 11.37%.
ROST’s sales for the first quarter that ended October 28, 2023, increased 7.9% year-over-year to $4.92 billion. In addition, the company’s net earnings and EPS came in at $447.33 million and $1.33, representing an increase of 30.8% and 33% year-over-year, respectively.
Street expects ROST’s revenue to come in at $21.07 billion for the year ending January 2025, up 4.7% year-over-year. Its EPS is expected to grow 8.9% year-over-year to $5.85 for the same period. It is expected to surpass EPS in all four trailing quarters. Shares of ROST have gained 38.3% over the past nine months to close the last trading session at $144.39.
ROST has an overall B rating, equating to a Buy in our POWR Ratings system.
ROST’s is ranked #12 in the same industry. It has a B grade for Sentiment, Momentum and Quality. To see additional ROST’s ratings for Growth, Stability and Value, click here.
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ROST shares were trading at $144.84 per share on Friday morning, up $0.45 (+0.31%). Year-to-date, ROST has gained 4.66%, versus a 5.68% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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