It is April and the weather is getting nicer, soon warm jumpers will be replaced by light summery clothes. This year, with vaccinations continuing at a rapid and reassuring pace, the hope of warm weather socializing is likely to bring the younger generations out in force. And where young people go, spending and apparel trends tend to follow.
With the fashion-conscious Gen Z’s and Millennials taking to the streets again, the apparel industry is bracing for a bounce back from 2020s poor performance. Indeed, the apparel market is poised to grow just over 60% this year, with a reported 56% year-over-year (YoY) increase in online retail spending in March alone.
So, as the apparel industry is readying its stocks, we give you three top apparel stocks to invest in before the summer truly begins.
1. Stitch Fix
Stitch Fix (NASDAQ: SFIX) is an apparel stock with a difference; using algorithms and data science, it personalizes clothing recommendations to each individual client. Over the past year, it has seen patches of slow revenue growth as the pandemic caused many people to stop spending money. Additionally, 2021 saw Stitch Fix’s stock rise rapidly, reaching its peak in late January and then losing 50% of its value within 2 months.
Despite this, Stitch Fix has seen its stock grow by more than 200% within 12 months and its subscriber growth has continued to grow 12% YoY, adding 110,000 new active clients in the last quarter alone. Furthermore, its revenue for its most recent quarter increased 12% YoY to $504.1 million.
In its forward-looking statements, the company is looking towards increasing its client base among men, directly targeting them with its data-driven personalized styling. It will also be looking to encourage a better customer retention rate. Stitch Fix is perfectly positioned as an alternative to brick-and-mortar stores, but one that offers a range of fashion-forward, yet individual pieces to add to any wardrobe.
Farfetch (NYSE: FTCH) is a Portuguese-British online fashion company that specifically focuses on luxury, high-end retail fashion. Although you may not have heard of this company, online luxury fashion has spent the better part of the last decade dominated by Farfetch and its competitor, Net-A-Porter.
The company sells items from over 700 boutiques and brands from around the world and despite luxury retail taking a big hit last year Farfetch increased its revenue by 64% YoY to $1.67 billion over the course of 2020. Luxury Fashion is a very large market valued at $300 billion in 2019, but it has always been a brick-and-mortar industry. With the pandemic, this market has now transitioned to an online space where Farfetch an essential player.
For the future, this is a perfect long-term investment opportunity as it continues to grow as a company. Indeed, the company has plans to become more sustainable with goals laid out to be achieved by 2030; including, net-zero emissions, to increase circular fashion, and increase diversity. These values are important to younger generations and will ensure that it will be a business that they come back to over and over again.
3. Levi Strauss & co.
Levi Strauss & Co. (NYSE: LEVI) is one of the most iconic apparel brands in the world. Founded in 1853, the ever-popular jean-maker is sewn into the fabric of U.S. fashion.
In its most recent quarter, Levi’s earned $0.34 per share on an adjusted basis, while reporting $1.31 billion in revenue. This topped analysts’ expectations, leading to a 2.6% stock surge on the 9th of April. To add to the positive report, Levi’s digital sales were up 41% YoY. This is a recurring theme as digital sales made up 40% of its total sales in 2020
Indeed, it is this digital sector that Levi is banking on for the future as it announced it will be making a big effort to focus on direct-to-consumer sales (DTC). This is very similar to what Nike has done over the past year, leaving existing wholesale deals in place, but expanding its own DTC sales online. This indicates a change in consumer behavior and that many other businesses will soon follow suit.
Levi Strauss has been around for over a century and a half as a beloved American brand. With its increased focus on DTC sales, this is a business that knows how to adapt and one that will benefit as the apparel market rebounds before summer.
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MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.
Contributing Writer at MyWallSt
Poppy’s favorite stock is Nvidia as she loves innovation and this stock has bags of it. Nvidia invented the GPU in 1999 and even today its immersive graphics give life to the gaming world. Poppy is also inspired by Nvidia’s ability to imagine and create positive change for the world, with its AI technology fuelling new developments in the automotive industry, the medical industry, as well as powering data centers around the world.