As we prepare to welcome the new year, the luxury sector demonstrates resilience amid the ever-growing impact of online shopping and holiday promotional activities. Given this backdrop, fundamentally strong luxury stocks Signet Jewelers Limited (SIG), Lands' End, Inc. (LE), and PVH Corp. (PVH) could be solid portfolio additions for 2024.
Retail sales reflected significant enhancements with the onset of the holiday shopping spell this November, as indicated by the CNBC/NRF Retail Monitor data brought forth by the National Retail Federation. This promising trend mirrors a positive implication for projections through December.
McKinsey’s analysis stipulates that the highest percentage of economic profit is projected to be yielded by the luxury market segment. The segment is forecast to grow globally by 3% to 5%. The U.S. market is forecasted for marked improvement in 2024, thus reinforcing an optimistic outlook.
The clientele of the luxury market has seen an incremental expansion, chiefly among the affluent demographic, whose expenditure remains largely unaffected by economic slumps. In fact, the top 2% of worldwide consumers contributed to 40% of luxurious spending in 2022, witnessing an increment from 35% back in 2009 as per analysts Bain & Co. Bain predicts the global luxury market to reach €1.5 trillion in 2023, up 8%-10% elevation from 2022.
The luxury retail market is transforming, with sales in the U.S. forecast to surpass $75 billion by the end of 2023. Factors contributing to this positive trend include an expanding demographic of prosperous consumers, rising income levels, a growing inclination for unique and exclusive merchandise, strategic branding endeavors, the increasing dominance of e-commerce, social media marketing, digital reinvention, and intensified efforts toward globalization.
Consequently, the global luxury fashion market is anticipated to grow at a CAGR of 3.1%, reaching $327.10 billion by 2032.
Considering these conducive trends, let's take a look at the fundamentals of the three B-rated Fashion & Luxury stocks, starting with number 3.
Stock #3: Signet Jewelers Limited (SIG)
Headquartered in Hamilton, Bermuda, SIG is a diamond jewelry retailer, operating through three segments: North America; International; and Other.
As of the market close on December 1, SIG has repurchased approximately 1.8 million shares at an average cost per share of $71.57, or $128.5 million, including $35.1 million during the third quarter. Roughly $672 million remains under the company's multi-year authorization.
In December, SIG's Board of Directors declared a quarterly dividend on common shares of $0.23 per share for the fourth quarter of fiscal year 2024, payable to shareholders on February 23, 2024.
Its annualized dividend rate of $0.92 per share translates to a dividend yield of 0.85% on the current share price. Its four-year average yield is 2.30%. SIG’s dividend payments have grown at a 34% CAGR over the past three years.
On December 1, SIG repurchased approximately 1.80 million shares at an average cost per share of $71.57, or $128.5 million, including $35.10 million during the third quarter ended October 28, 2023. Approximately $672 million remained under the company's multi-year authorization.
SIG’s trailing-12-month cash from operations of $748.10 million is 207.6% higher than the industry average of $243.20 million. Its trailing-12-month levered FCF and net income margins of 8.55% and 6.29% are 62.8% and 39.1% higher than the industry averages of 5.25% and 4.52%, respectively.
In the fiscal third quarter that ended October 28, 2023, SIG’s sales and gross margin stood at $1.39 billion and $501.30 million, respectively. Moreover, its total non-GAAP operating income stood at $23.90 million. Moreover, its net income attributable to common shareholders and non-GAAP EPS stood at $3 million and $0.24, respectively.
Street expects SIG’s EPS for the fiscal fourth quarter ending January 2024 to increase 15.5% year-over-year to $6.37. Its revenue is expected to be $2.54 billion. The company surpassed consensus EPS estimates in each of the trailing four quarters and consensus revenue estimates in three of the trailing four quarters, which is impressive.
The stock has gained 68.8% over the past six months to close the last trading session at $107.70. Over the past year, it has gained 62.9%.
SIG’s POWR Ratings reflect its positive prospects. The stock has an overall B rating, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has a B grade for Value and Quality. Within the B-rated Fashion & Luxury industry, it is ranked #21 out of 62 stocks.
To see additional POWR Ratings for Growth, Momentum, Stability, and Sentiment for SIG, click here.
Stock #2: Lands' End, Inc. (LE)
LE is a digital retailer of casual clothing, swimwear, outerwear, accessories, footwear, and home products. It operates through U.S. eCommerce; International; Outfitters; Third Party; and Retail segments.
During the third quarter, LE repurchased $3 million of the company’s common stock under its previously announced share repurchase program. As of October 27, 2023, additional purchases of up to $31.80 million could be made under the program through February 2, 2024.
On September 28, LE honored 40 years of its iconic Squall Jacket by launching a limited-edition 1963 design. The collection included five exclusive Squall styles, which incorporate designs that pay tribute to the brand’s quintessential heritage. This should bode well for the company.
LE’s trailing-12-month asset turnover ratio of 1.38x is 38.5% higher than the industry average of 0.99x. Its trailing-12-month gross profit and levered FCF margins of 40.50% and 5.85% are 14.2% and 11.4% higher than the industry averages of 35.47% and 5.25%, respectively.
In the fiscal third quarter that ended October 27, 2023, LE’s net revenue stood at $324.74 million, while gross profit increased 2.8% year-over-year to $152.59 million. Moreover, its adjusted EBITDA stood at $17.28 million, up 3.7% from the year-ago quarter.
For the nine months that ended October 27, 2023, cash, cash equivalents and restricted cash increased 26.1% from the prior-year period to $38.65 million. As of October 27, 2023, LE’s total current liabilities stood at $290.86 million, compared to $360.29 million as of October 28, 2022.
For the fourth quarter of fiscal 2023, the company expects its net revenue to be between $490 million and $520 million, net income to be between $4 million and $7 million, and diluted earnings per share to be between $0.13 and $0.22. Moreover, its adjusted EBITDA is projected to be between $27.5 million and $31.5 million.
Street expects LE’s revenue and EPS for the fiscal fourth quarter ending January 2024 to be $502.71 million and $0.22, respectively.
The stock has gained 35.7% over the past year to close the last trading session at $9.36. Over the past month, it has gained 33.1%.
LE’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our proprietary rating system.
LE has a B grade for Growth, Value, and Sentiment. Within the same industry, it is ranked #16.
Beyond what we’ve stated above, we have also rated the stock for Momentum, Stability, and Quality. Get all ratings of LE here.
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.
Delivering on its commitment under the PVH+ Plan to return excess cash to stockholders, PVH repurchased 0.90 million shares of its common stock for $68 million during the third quarter ended October 29, 2023, bringing total share repurchases for the first nine months ended October 29, 2023, to 3.20 million shares for $268 million.
Additionally, planned share repurchases in 2023 are expected to increase to approximately $550 million from up to $400 million previously.
Its annualized dividend rate of $0.15 per share translates to a dividend yield of 0.12% on the current share price. Its four-year average yield is 0.14%. PVH’s dividend payments have grown at a 26% CAGR over the past three years.
PVH’s trailing-12-month cash from operations of $626.60 million is 154.5% higher than the industry average of $246.19 million. Its trailing-12-month gross profit and net income margins of 56.99% and 5.76% are 60.7% and 28.5% higher than the industry averages of 35.47% and 4.48%, respectively.
In the fiscal third quarter that ended October 29, 2023, PVH’s total revenue and gross profit increased 3.6% and 5.1% year-over-year to $2.36 billion and $1.34 billion, respectively. Moreover, its non-GAAP earnings before interest and taxes stood at $248.60 million, up 13.1% from the year-ago quarter.
For the same quarter, non-GAAP net income and non-GAAP net income per common share stood at $176.40 million and $2.90, up 4.1% and 11.5% from the prior-year quarter, respectively.
Street expects PVH’s EPS for the fiscal fourth quarter ending January 2024 to increase 47% year-over-year to $3.50. Its revenue is expected to be $2.41 billion. The company surpassed consensus EPS estimates in each of the trailing four quarters and consensus revenue estimates in three of the trailing four quarters.
The stock has gained 64% over the past three months to close the last trading session at $123.28. Over the past year, it has gained 78.5%.
PVH’s robust prospects are reflected in its POWR Ratings. The stock has an overall B rating, equating to Buy in our proprietary rating system.
PVH has a B grade for Growth and Value. It is ranked #10 within the same industry.
Click here for the additional POWR Ratings for PVH (Momentum, Stability, Sentiment, and Quality).
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PVH shares were unchanged in premarket trading Friday. Year-to-date, PVH has gained 74.97%, versus a 26.54% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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