As we near the joyous holiday season, Black Friday marks the beginning of the Christmas shopping spree and is known for widespread promotions, discounts, and special deals offered by retailers. Moreover, easing inflation coupled with the holiday season could drive more foot traffic to retail stores and boost online shopping activity.
In light of the upcoming Black Friday frenzy, it could be wise for investors to monitor three fundamentally sound retail stocks: Oxford Industries, Inc. (OXM), The Buckle, Inc. (BKE), and Burberry Group plc (BURBY), which seem well-equipped to capitalize on the industry tailwinds.
Despite the challenges posed by high inflation impacting consumer budgets throughout the year, there is a notable sense of optimism. In October, Early Black Friday discounts were considerably more prominent than in previous years, suggesting that retailers are apprehensive about the possibility of subdued demand during the crucial holiday shopping season.
Consumers can anticipate better deals and promotions as they embark on holiday shopping, with retailers aiming to attract shoppers through more significant and early discounts. For instance, promotions spanning various categories, such as apparel, appliances, and computers, experienced a notable increase last month compared to 2021 and 2022, according to data from Adobe Analytics.
Furthermore, the price of apparel online witnessed a 9% reduction throughout October compared to the initial month, surpassing the 2% and 5% decreases observed in 2021 and 2022, respectively, as indicated by the data.
Additionally, the October inflation data witnessed no change in inflation from the previous month but recorded a 3.2% increase from the corresponding period a year ago.
When excluding the influence of volatile food and energy prices, the core Consumer Price Index (CPI) experienced a 0.2% and 4% rise, contrary to the projected figures of 0.3% and 4.1%, respectively, representing the slightest increase since September 2021.
Taking into account the aforementioned factors, the fashion and luxury sector stands to gain significantly from the present situation. Projections indicate that the U.S. luxury apparel market is poised to achieve $3.55 billion in revenue by 2023, with an anticipated CAGR of 9.3%, reaching $5.54 billion by 2028.
Overall, the intersection of Black Friday and an easing inflation creates a favorable landscape for companies operating within the Fashion & Luxury industry. To that end, let us delve deeper into the fundamentals of the featured stocks, beginning with number three.
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’s brand portfolio includes Tommy Bahama, Lilly Pulitzer, and Southern Tide.
On October 13, OXM paid its shareholders a quarterly dividend of $0.65 per share. The company’s annual dividend of $2.60 translates to a 2.75% yield on the prevailing prices, while its four-year average dividend yield is 2.10%. Its dividend has grown at CAGRs of 30.7% and 14.2% over the past three and five years, respectively.
OXM’s trailing-12-month net income margin of 10.53% is 139.5% higher than the 4.40% industry average. Its trailing-12-month Return on Common Equity (ROCE) of 27.91% is 153.9% higher than the industry average of 10.99%. Furthermore, the stock’s trailing-12-month EBIT margin of 14.02% is 89.4% higher than the 7.40% industry average.
For the fiscal second quarter, which ended on July 29, 2023, OXM’s net sales increased 15.6% year-over-year to $420.32 million, while its gross profit rose 15.8% from the year-ago value to $268.73 million. During the same period, the company’s net earnings amounted to $51.45 million and $3.22 per share, respectively.
Analysts expect OXM’s revenue for the third quarter (ended October 2023) to increase 4.1% year-over-year to $325.89 million. While its EPS for the same quarter is expected to be $0.97 and improve by 10% per annum over the next five years. Moreover, the company has an excellent earnings surprise history, surpassing the EPS estimates in each of the trailing four quarters.
OXM’s shares have gained marginally year-to-date to close the last trading session at $94.53.
OXM’s POWR Ratings reflect this promising outlook. It has a B grade for Value and Quality. In the 62-stock B-rated Fashion & Luxury industry, it is ranked #27. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Click here to see OXM’s ratings for Growth, Momentum, Stability, and Sentiment.
Stock #2: The Buckle, Inc. (BKE)
BKE operates as a retailer of casual apparel, footwear, and accessories for young men and women in the United States. It markets brand-name casual apparel, including denim, other casual bottoms, tops, sportswear, outerwear, accessories, footwear, etc.
On October 27, BKE paid its shareholders a quarterly dividend of $0.35 per share. The company’s annual dividend of $1.40 translates to a 3.71% yield on the prevailing prices, while its four-year average dividend yield is 13.70%. Its dividend has grown at CAGRs of 32.6% and 6.9% over the past three and five years, respectively.
BKE’s trailing-12-month net income margin of 17.82% is 305.4% higher than the 4.40% industry average. Its trailing-12-month ROCE of 50.17% is 356.3% higher than the industry average of 10.99%. Furthermore, the stock’s trailing-12-month EBIT margin of 22.22% is 200.1% higher than the 7.40% industry average.
BKE’s sales for the third quarter (ended October 28, 2023) amounted to $303.46 million, while its net income and EPS came in at $51.76 million and $1.04, respectively.
In addition, during the same period, the company’s cash and cash equivalents and total current assets amounted to $311.66 million and $508.94 million, up 23.5% and 20.2% compared to $252.08 million and $423.34 million as of January 28, 2023, respectively.
For the fiscal fourth quarter (ending January 2024), BKE’s revenue and EPS are projected to be 399.25 million and $1.46, respectively. Its EPS is expected to increase by 8% annually over the next five years. Moreover, the company surpassed its EPS estimates in three of the trailing four quarters, which is promising.
The stock has gained 12.9% over the past six months to close the last trading session at $37.70.
BKE’s sound fundamentals are reflected in its POWR Ratings. It has an A grade for Quality. Within the same industry, it is ranked #26. Click here to see BKE’s ratings for Growth, Value, Momentum, Stability, and Sentiment.
Stock #1: 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.
On October 2, BURBY acquired a product development business from its longstanding Italian supplier, Pattern SpA. This strategic investment marks a significant enhancement to BURBY’s technical outerwear capabilities, providing the brand with greater oversight over product quality, cost, delivery, and sustainability.
Moreover, this development not only underscores BURBY’s commitment to weaving gabardine and crafting the iconic heritage trench coats but also showcases the brand's dedication to maintaining excellence across its diverse product portfolio.
The stock’s trailing-12-month net income margin of 14.47% is 229.2% higher than the 4.40% industry average. Its trailing-12-month ROCE of 34.54% is 214.1% higher than the industry average of 10.99%. Furthermore, BURBY’s trailing-12-month EBIT margin of 19.68% is 165.8% higher than the 7.40% industry average.
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).
Street expects BURBY’s revenue for the fiscal period ending March 2024 to increase 3.1% year-over-year to $3.96 billion, while its EPS for the same period is expected to be $1.37.
The stock gained marginally intraday to close the last trading session at $19.51.
It’s no surprise that BURBY has an overall rating of B, which equates to Buy in our proprietary rating system. It has a B grade for Stability and Quality. In the same industry, it is ranked #15.
In addition to the POWR Ratings we’ve stated above, we also have BURBY’s ratings for Growth, Value, Momentum, and Sentiment. Get all BURBY 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.
BURBY shares were unchanged in premarket trading Monday. Year-to-date, BURBY has declined -17.99%, versus a 19.18% 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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