The prices of several goods, including clothing and apparel, are set to increase this holiday season, due primarily to the COVID-19 omicron variant-driven logistical disruptions in industry. However, consumer demand for clothing is not expected to decline soon.
Indeed, according to a Forbes report, the demand for second-hand clothing is growing, and recycled clothes are expected to become mainstream in 2022. In addition, the e-commerce fashion industry is skyrocketing. According to a Statista report, the global fashion e-commerce industry is expected to grow at a 9.1% CAGR between 2021 – 2025.
Given this backdrop, we think it could be wise to bet on fundamentally sound clothing retail stocks H & M Hennes & Mauritz AB (HNNMY), Chico's FAS, Inc. (CHS), and Vera Bradley, Inc. (VRA), which are each trading at less than $10 per share.
H & M Hennes & Mauritz AB (HNNMY)
Headquartered in Stockholm, Sweden, HNNMY provides clothing, accessories, footwear, cosmetics, home textiles, and homeware for women, men, teenagers, children, and babies worldwide. It has approximately 51 online markets and some 5,000 stores across 74 regions.
On November 26, 2021, HNNMY launched its new streetwear collection in , collaboration with the universal counterculture symbol, Smiley. The collaboration is expected to boost the company’s sales ahead of the holiday season.
HNNMY’s net sales increased 9.3% year-over-year to SEK 55.59 billion ($6.12 billion) for the third quarter, ended September 30, 2021. Its operating profit came in at SEK 6.27 billion ($690.98 million), up 132.3% year-over-year. Its profit increased 157.7% year-over-year to SEK 4.69 billion ($516.91 million), while its EPS came in at SEK 2.83, up 157.3% year-over-year.
For its fiscal year 2022, HNNMY’s revenue is expected to grow 11.7% year-over-year to $24.62 billion. The stock has gained 5.5% in price since hitting its 52-week low of $3.43 on November 26, 2021, to close Friday’s trading session at $3.62.
HNNMY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which indicates a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
In addition, HNNMY has an A grade for Momentum and Quality and a B grade for Growth. HNNMY is ranked #5 of 63 stocks in the Fashion & Luxury industry. Click here to see the additional POWR Ratings for HNNMY (Value, Stability, and Sentiment).
Chico's FAS, Inc. (CHS)
CHS in Fort Myers, Fla., operates as an omnichannel specialty retailer of women's private branded casual-to-dressy clothing, intimates, and complementary accessories. It has around 1,302 stores across the U.S., Puerto Rico, & the US Virgin Islands, with 68 international franchise locations in Mexico and two domestic airport locations.
On November 30, 2021, Molly Langenstein, CHS’ CEO and President, commented, “We are a digital-first, customer-led company with a clear path for profitable growth. We have three unique brands, each with their own opportunities for expanding their customer bases, market share and sales. We continue to improve our operating performance, strengthen our balance sheet, and build our team and infrastructure. We believe we are poised to generate shareholder value over the long term and look forward to continued success ahead.”
For its fiscal third quarter, ended October 30, 2021, CHS’ total net sales increased 29.1% year-over-year to $453.64 million. The company’s net income came in at $18.23 million, compared to a $55.87 million loss in the year-ago period. Also, its EPS came in at $0.15, compared to a $0.48 loss a year ago.
CHS’ revenue is expected to grow 37.7% year-over-year to $1.82 billion in its fiscal 2022. Its EPS is expected to increase 111.6% year-over-year to $0.36 in the current year. Also, it surpassed the Street’s EPS estimates in three of the trailing four quarters. Over the past nine months, the stock has gained 78.2% in price to close Friday’s trading session at $5.38.
CHS’ POWR ratings reflect this promising outlook. The stock has an overall B rating, equating to a Buy in our proprietary rating system. In addition, it has an A grade for Momentum and a B grade for Growth, Value, and Quality. CHS is ranked #13 in the Fashion & Luxury industry. Click here to see CHS’ ratings for Stability and Sentiment as well.
Vera Bradley, Inc. (VRA)
Together with its subsidiaries, Roanoke, Ind.-based VRA designs, manufactures, and sells women's handbags, luggage, travel items, fashion, home accessories, and gifts. It operates through three segments: Vera Bradley Direct, Vera Bradley Indirect, and Pura Vida.
On December 8, 2021, Rob Wallstrom, the company’s CEO, said, “We are confident that both our Vera Bradley and Pura Vida brands have meaningful long-term growth opportunities, well beyond their core product categories. We remain focused on our vision to be a purpose-driven, multi-lifestyle brand, high-growth company.”
VRA’s net revenues increased 7.9% year-over-year to $134.74 million for its fiscal third quarter, ended October 30, 2021. The company’s total current assets increased 2% year-over-year to $277.31 million. Also, its cash and cash equivalents came in at $74.78 million for the period ended October 30, 2021, compared to $64.17 million for the period ended January 31, 2021.
Analysts expect VRA’s revenue to be $548.34 million in its fiscal 2022, representing a 17.1% year-over-year rise. In addition, the company’s EPS is expected to increase 13.4% year-over-year to $0.76 in the next year. Over the past year, the stock has gained 14.3% in price to close Friday’s trading session at $8.31.
VRA’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.
In addition, VRA has an A grade for Value and a B grade for Momentum and Quality. Within the Fashion & Luxury industry, it is ranked #40. Also, click here to see the additional POWR Ratings for Growth, Stability, and Sentiment for VRA.
HNNMY shares were trading at $3.57 per share on Monday afternoon, down $0.06 (-1.52%). Year-to-date, HNNMY has declined -10.26%, versus a 26.34% 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.3 Clothing Retail Stocks Under $10 To Buy This Holiday Season appeared first on StockNews.com