Several factors, such as rising fashion-conscious consumers with higher disposable incomes, growing social media influence on consumer behavior, and a rapid consumer shift toward online shopping, would drive the luxury fashion industry’s growth and expansion in the long term.
With the industry’s bright prospects in mind, fundamentally sound luxury and fashion stocks J.Jill, Inc. (JILL), Weyco Group, Inc. (WEYS), and Hugo Boss AG (BOSSY) could be solid buys this year for potential gains.
Despite several challenges, including persistent inflation and subdued economic growth, the luxury fashion industry is well-positioned to witness sustained growth in 2024 and beyond, propelled by an increasing number of affluent consumers and their rising income and spending levels backed by the growing aspiration for exclusivity and uniqueness.
As per McKinsey’s forecasts, the global fashion industry will post top-line growth of 2% to 4% in 2024, with regional and country-level variations. Again, the luxury segment is anticipated to generate the biggest share of economic profit. The luxury segment will grow by 3% to 5% globally this year, with U.S. growth expected to pick up after a relatively weak 2023.
According to a report by Research and Markets, the global luxury fashion market is expected to reach a staggering $401.73 billion by 2028, growing at a CAGR of 6.1% during the forecast period.
Nowadays, the power of branding and brand equity, the increasing usage of social media and digital platforms, and rapid globalization are influencing the behavior of individuals significantly, propelling the luxury fashion market.
In addition, evolving consumer preferences will continue to offer opportunities to fashion companies. Lately, luxury brands are embracing e-commerce’s power to boost sales, foster connections, and inspire clientele. More personalized buying experience, multiple payment options, effective content strategy, and easy checkout process contribute to the growth of e-commerce.
With Gen Z and millennials now accounting for nearly 50% of purchases, online luxury purchases have surged over the past few years.
Given these favorable trends, let’s discuss the top three Fashion & Luxury industry stocks, starting from the third one.
Stock #3: J.Jill, Inc. (JILL)
JILL is an omnichannel retailer of women’s apparel under the J.Jill brand. The company offers casual wear, athletic wear, loungewear, footwear, and accessories, including scarves and jewelry. The company markets its products through retail stores, websites, and catalogs.
On September 14, 2023, JILL launched Wearever Works, a limited-edition capsule collection designed to offer comfort, tailoring, and versatility for every aspect of a woman’s life. This collection is very versatile and can be suitable for long day work hours and special occasions at night, offering a diverse range.
JILL’s trailing-12-month gross profit margin of 69.98% is 97.6% higher than the industry average of 35.41%. Further, the stock’s trailing-12-month net income margin of 5.39% is 15.5% higher than the industry average of 4.66%.
In terms of forward Price/Sales, JILL is trading at 0.42x, 51.8% lower than the industry average of 0.87x. Likewise, the stock’s forward non-GAAP P/E multiple of 8.41 is 44.9% lower than the industry average of 15.25. In addition, its forward EV/Sales of 0.82x is 31.2% lower than the industry average of 1.19x.
JILL reported net sales of $150.12 million for the fiscal 2024 third quarter that ended October 28, 2023. Its gross profit grew 2.7% year-over-year to $107.84 million. The company’s adjusted income from operations increased 6.8% from the year-ago value to $21.52 million. Also, its adjusted EBITDA was $28.27 million, a 2.7% growth from the prior year’s quarter.
In addition, the company’s adjusted net income and adjusted EPS came in at $11.34 million and $0.78, up 32.9% and 1.3% year-over-year, respectively.
For the fourth quarter of fiscal 2023, JILL expects revenues to be nearly flat compared to the fourth quarter of fiscal 2022, and its adjusted EBITDA is expected to be in the range of $11 million and $13 million. The fourth quarter adjusted EBITDA outlook includes approximately $2 million of benefit from the 53rd week in fiscal 2023.
Street expects JILL’s revenue and EPS for the fiscal year (ending January 2025) to increase 1.1% and 13.9% year-over-year to $609.42 million and $3.23, respectively. Also, the company has topped the consensus revenue estimates in all four trailing quarters, which is remarkable.
Shares of JILL have gained 22.4% over the past six months to close the last trading session at $24.07.
JILL’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
JILL has an A grade for Quality and a B for Value and Sentiment. It is ranked #3 out of 62 stocks in the B-rated Fashion & Luxury industry.
In addition to the POWR Ratings we’ve stated above, we also have JILL ratings for Growth, Momentum, and Stability. Get all JILL ratings here.
Stock #2: Weyco Group, Inc. (WEYS)
WEYS is a leading designer and distributor of footwear for men, women, and children. The company operates in two segments: North American Wholesale Operations and North American Retail Operations. It offers mid-priced leather dress shoes and casual footwear under the Florsheim, Nunn Bush, Stacy Adams, BOGS, Rafters, and Forsake brands.
On November 7, 2023, WEYS’ Board of Directors declared a cash dividend of $0.25 per share, paid on January 2, 2024, to all shareholders of record on November 27, 2023.WEYS pays an annual dividend of $1, which translates to a yield of 3.21% at the current share price. Its four-year average dividend yield is 4.27%.
Moreover, the company’s dividend payouts have increased at a CAGR of 5.6% over the past three years.
In terms of trailing-12-month P/E, WEYS is trading at 9.42x, 44.1% lower than the industry average of 16.86x. Moreover, the stock’s trailing-12-month EV/Sales multiple of 0.80 is 33.1% lower than the industry average of 1.19.
WEYS’ trailing-12-month gross profit margin and EBIT margin of 44.11% and 12.70% are 24.6% and 66.2% higher than the industry averages of 35.41% and 7.64%, respectively. In addition, the stock’s trailing-12-month net income margin of 9.47% is considerably higher than the industry average of 4.66%.
For the nine months ended September 30, 2023, WEYS reported net sales of $252.69 million. Its gross earnings rose 4.1% year-over-year to $102.32 million. Its earnings from operations were $29.52 million, up 16.7% from the prior year’s period. Its net earnings and EPS came in at $21.65 million and $2.27, up 12.1% and 12.9% year-over-year, respectively.
In addition, the company’s cash and cash equivalents as of September 30, 2023, were $33.40 million, compared to $16.88 million as of December 31, 2022.
Over the past six months, the stock has gained 18.3% and 19.6% over the past year to close the last trading session at $31.11.
WEYS’ promising outlook is reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
The stock has an A grade for Value and a B for Quality and Sentiment. Within the same industry, WEYS is ranked #2 of 62 stocks.
Click here to access additional ratings of WEYS for Growth, Momentum, and Stability.
Stock #1: Hugo Boss AG (BOSSY)
Headquartered in Metzingen, Germany, BOSSY offers clothes, shoes, and accessories for men and women worldwide. The company also provides licensed products comprising fragrances, eyewear, watches, children's fashion, and dog-related accessories. It markets and sells its products under the BOSS and HUGO brand names.
BOSSY’s trailing-12-month gross profit margin of 61.44% is 73.5% higher than the industry average of 35.41%. The stock’s trailing-12-month net income margin of 5.95% is 27.7% higher than the industry average of 4.66%. Also, its trailing-12-month EBIT margin of 9.95% is 30.3% higher than the 7.64% industry average.
BOSSY’s revenue and EBITDA have grown at respective CAGRs of 23.2% and 58.9% over the past three years. The company’s EBIT has increased 234.8% over the same timeframe, while its tangible book value and total assets have improved at CAGRs of 20.9% and 8.9%, respectively.
As per the preliminary results, BOSSY’s currency-adjusted sales rose 13% year-over-year to €1.18 billion ($1.28 billion). All brands, regions, and channels contributed to quarterly sales growth. Its EBIT increased 17% to €121 million ($131.64 million) on a preliminary basis.
For the fiscal year 2023, the company’s currency-adjusted sales grew 18% to a record level of €4.20 billion ($4.56 billion). Its EBIT rose 22% year-over-year to €410 million ($446.04 million) on a preliminary basis.
“With our strong brand momentum and the ongoing successful execution of our ‘CLAIM 5’ strategy, we have laid a robust foundation for continuing our market-share-winning trajectory and making further progress in becoming one of the top 100 global brands, said Daniel Grieder, CEO of HUGO BOSS.
During the third quarter that ended September 30, 2023, BOSSY’s sales grew 10.1% year-over-year to €1.03 billion ($1.12 billion). The company’s gross profit increased 9.9% from the year-ago value to €623 million ($677.77 million). Its operating result (EBIT) was €103 million ($112.05 million), up 11.9% from the previous year’s quarter.
Furthermore, the company’s net income came in at €63 million ($68.54 million) and €0.91 per share, indicating growth of 5% and 8.3% from the prior year’s quarter, respectively.
Analysts expect BOSSY’s revenue for the fourth quarter (ended December 2023) to increase 12.6% year-over-year to $1.27 billion. For the fiscal year 2024, the company’s revenue and EPS are expected to increase 9.1% and 24.4% year-over-year to $4.98 billion and $1.02, respectively.
Moreover, the company has surpassed the consensus revenue estimates in each of the trailing four quarters.
BOSSY’s stock has surged marginally over the past year to close the last trading session at $12.85.
BOSSY’s POWR Ratings reflect its robust prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
The stock has an A grade for Growth and a B for Stability, Sentiment, Quality, and Value. BOSSY has topped among the 44 stocks in the B-rated Fashion & Luxury industry.
Click here to access BOSSY’s additional ratings.
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.
BOSSY shares were unchanged in premarket trading Friday. Year-to-date, BOSSY has declined -12.79%, versus a 0.66% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
Top 3 Luxury Stocks Investors Are Buying in 2024 StockNews.com
