The luxury industry is expected to flourish due to rising consumer spending and a growing demand for premium experiences and products, particularly in emerging markets. So, investors could watch quality luxury stocks Victoria’s Secret & Co. (VSCO), Fossil Group, Inc. (FOSL) and Macy’s, Inc. (M) during the holiday season.
Before delving deeper into their fundamentals, let’s discuss what’s happening in the luxury industry.
The holiday season outlook in 2023 is favorable due to strong retail spending, with 74% of consumers expecting to spend the same or more across various categories.
According to the latest Bain & Company and Altagamma study, the global luxury industry is predicted to grow by 8 to 10% to a record $1.6 trillion. This expansion can be attributed to rising disposable income, shifting consumer preferences, and increasing the number of high-net-worth individuals.
Moreover, the global luxury fashion market is expected to reach $198.55 billion by 2031 at a CAGR of 5.5%. The increasing number of affluent consumers and their rising income levels, the growing desire for exclusivity and uniqueness, the strength of branding and brand equity, the expanding importance of social media and digital platforms, and fast globalization are some of the primary factors driving the market.
Considering these conducive trends, let’s take a look at the fundamentals of the three Fashion & Luxury stocks, starting with number 3.
Stock #3: Victoria’s Secret & Co. (VSCO)
VSCO is a global retailer of women’s intimate apparel, beauty products, and accessories, with well-known brands such as Victoria’s Secret, PINK, Victoria’s Secret Beauty, and Adore Me. The company sells through retail locations, websites, and a variety of distribution channels, including franchise and wholesale agreements.
VSCO’s trailing-12-month EV/Sales of 0.71x is 38.4% lower than the industry average of 1.15x. Its trailing-12-month Price/Sales of 0.26x is 68.9% lower than the industry average of 0.84x.
VSCO’s trailing-12-month gross profit margin of 43.72% is 22.3% higher than the industry average of 35.74%. Its 4.05% trailing-12-month CAPEX/Sales is 24.8% higher than the 3.24% industry average.
For the second quarter ended July 29, 2023, VSCO reported net sales of $1.43 billion and gross profit of $486.57 million. The company’s adjusted net income and adjusted operating income amounted to $18.85 million and $48.70 million.
VSCO’s total current liabilities came in at $1.41 billion for the period that ended July 29, 2023, compared to $1.58 billion for the period that ended January 28, 2023. Also, its total liabilities came in at $4.23 billion, compared to $4.31 billion for the same period.
Analysts expect VSCO’s revenue to increase 2.5% year-over-year to 2.07 billion for the quarter ending January 2024. Its EPS is expected to come in at $2.45 for the same period. Shares of VSCO has gained 35.4% over the past year to close the last trading session at $20.92.
VSCO’s POWR Ratings reflect this optimistic outlook. The stock has an overall rating of C, equating to a Neutral in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
VSCO also has a B grade for Value. It is ranked #49 out of 63 stocks in the Fashion & Luxury industry. Click here for the additional POWR Ratings for Growth, Stability, Sentiment, Momentum and Quality for VSCO.
Stock #2: Fossil Group, Inc. (FOSL)
FOSL, together with its subsidiaries, designs, develops, markets, and distributes consumer fashion accessories in the United States, Europe, Asia, and internationally.
FOSL’s trailing-12-month EV/Sales of 0.26x is 77.2% lower than the industry average of 1.15x. Its trailing-12-month Price/Sales of 0.04x is 94.8% lower than the industry average of 0.85x.
FOSL’s trailing-12-month asset turnover ratio of 1.25x is 25.6% higher than the 1x industry average. Its trailing-12-month gross profit margin of 48.40% is 35.4% higher than the 35.74% industry average.
FOSL’s total current liabilities came in at $348.60 million for the period that ended September 30, 2023, compared to $428.80 million for the period that ended October 1, 2022. Also, its total long-term liabilities came in at $435.80 million, compared to $496 million for the same period.
Shares of FOSL has gained 10.9% intraday to close the last trading session at $1.27.
FOSL has a B grade for Value. It is ranked #46 in the same industry.
Beyond what is stated above, we’ve also rated FOSL for Stability, Growth, Sentiment, Momentum and Quality. Get all FOSL ratings here.
Stock #1: Macy’s, Inc. (M)
M is an omni-channel retail organization, operates stores, websites, and mobile applications in the United States.
M’s forward EV/EBITDA of 4.33x is 54.9% lower than the industry average of 9.58x. Its forward EV/EBIT of 7.67x is 42.9% lower than the industry average of 13.44x.
M’s trailing-12-month ROCE of 19.35% is 76% higher than the industry average of 10.99%. Its trailing-12-month gross profit margin of 39.17% is 9.6% higher than the industry average of 35.74%.
In the third quarter ended October 28, 2023, M reported net sales of $4.86 billion and operating income of $86 million. The company’s net income and EPS amounted to $43 million and $0.15.
M’s total current liabilities came in at $6.01 billion for the period that ended October 28, 2023, compared to $6.74 billion for the period that ended October 29, 2022.
The stock has gained 19.3% over the past month to close the last trading session at $12.61.
M’s uncertain fundamentals are reflected in its POWR Ratings.
It is ranked #42 in the same industry. It has an A grade for Value and a B for Momentum. To see additional M’s ratings for Growth, Sentiment, Stability and Quality, click here.
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M shares were trading at $13.43 per share on Thursday morning, up $0.82 (+6.50%). Year-to-date, M has declined -32.74%, versus a 18.74% rise in the benchmark S&P 500 index during the same period.
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