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Scoop Up These 2 Buy-Rated Apparel Stocks Under $10

Because retail apparel stores continue to attract increasing foot traffic, and the country’s overall retail sales are expected to increase in the coming months, we think it could be wise to bet on fundamentally sound apparel stocks H & M (HNNMY) and Chico’s FAS (CHS). They are trading at less than $10 per share and have a Buy rating in our proprietary rating system. Read on

The rapid spread of the COVID-19 Delta variant continues to worry investors regarding the pace of economic growth. In addition, according to The Conference Board, its Consumer Confidence Index came in at 113.8 in August, the lowest level since February 2021. U.S. retail sales increased 15.1% year-over-year last month, however. Clothing and accessory stores sales also increased 38.8% year-over-year.

Moreover, according to a ModernRetail report, several apparel retailers are investing in new categories this year to recapture market share, which is expected to drive sales. Also, initiatives to increase the efficacy of vaccines, a rise in consumer spending, growth in e-commerce, and rising foot traffic in retail stores are expected to help boost the apparel industry’s growth.

Given this backdrop, we think it could be wise to scoop up quality apparel stocks H & M Hennes & Mauritz AB (publ) (HNNMY) and Chico's FAS, Inc. (CHS), which are currently trading at less than $10. In addition, these two stocks have an overall B (Buy) rating in our proprietary POWR Ratings system.

Click here to checkout our Retail Industry Report for 2021

H & M Hennes & Mauritz AB (publ) (HNNMY)

Based in Sweden, HNNMY provides clothing, accessories, footwear, cosmetics, home textiles, and homeware for women, men, teenagers, children, and babies worldwide, across 51 online markets and approximately 5,000 stores in 74 markets.

On September 10, 2021, HNNMY Home launched its concept store in Paris. Ida Lindahl, General Manager of H&M HOME, said, “This beautiful store is situated in the most stunning building and with its modern and welcoming environment it will become a perfect physical complement to our digital presence through social media and e-commerce.”

HNNMY’s sales came in at SEK46,509 million ($5.37 million) for its fiscal second quarter, ended May 31, 2021, up 62.3% year-over-year. The company’s gross profit was SEK25,049 million ($2.89 million), up 88.6% year-over-year. Its operating profit came in at SEK 3,852 million ($444,790 ) compared to a SEK6,188 million ($714,.530 thousand) loss  in the prior-year period. Also, its EPS came in at SEK1.67 compared to a SEK3.02 loss in the year-ago period.

For its fiscal year 2022, analysts expect HNNMY’s revenue to increase 12.1% year-over-year to $25.77 billion. The stock has climbed  11.3% in price over the past year to close yesterday’s trading session at $3.96.

HNNMY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

HNNMY has an A grade for Momentum and Quality, and a B grade for Stability. Within the A-rated Fashion & Luxury industry, it is ranked #29 of 63 stocks. Click here to see the additional POWR Ratings for Value, Growth, and Sentiment for HNNMY.

Chico's FAS, Inc. (CHS)

CHS in Fort Myers, Fla., is an omnichannel specialty retailer of women's private branded clothing across 1,302 stores in the United States, Puerto Rico, and the United States Virgin Islands, and 68 international franchise locations in Mexico and two domestic airport locations.

Molly Langenstein, CHS' President and CEO, said, “Our second quarter earnings performance was the best second quarter Chico's FAS has posted since 2013, and these results show the incredible progress we continue to make in our turnaround strategy, despite pandemic challenges. Our return to profitability in the quarter was driven by our strategic actions that grew sales, expanded gross margin, and diligently controlled our expenses."

CHS’ net sales increased 54.2% year-over-year to $472.06 million for the second quarter, ended July 31, 2021. Its net income came in at $26.19 million, versus  a $46.84 million loss in the prior-year quarter. Also, its EPS was  $0.21 compared to a loss per share of $0.40 in the year-ago period. Moreover, the company's gross margin came in at $181.46 million, up 305.3% year-over-year.

Analysts expect CHS’ EPS to come in at $0.43 in the next year, representing a 152.9% year-over-year increase. In addition, the company’s revenue is expected to rise 33.5% year-over-year to $1.77 billion in its fiscal year 2022. Over the past year, the stock gained 310.3% in price to close yesterday’s trading session at $4.76.

CHS’ POWR Ratings reflect solid prospects. The company has an overall B rating, which equates to a Buy in our proprietary rating system.

In addition, CHS has an A grade for Momentum, and a B grade for Growth, Value, and Quality. CHS is ranked #24 in the  Fashion & Luxury industry. Click here to see the additional POWR Ratings for CHS (Stability and Sentiment).

Click here to checkout our Retail Industry Report for 2021

HNNMY shares were trading at $3.97 per share on Tuesday afternoon, down $0.00 (+0.13%). Year-to-date, HNNMY has declined -2.93%, versus a 16.97% rise in the benchmark S&P 500 index during the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.


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