The increase in affluent consumers, along with their rising purchasing power, the increasing influence of social media and digital platforms, and rapid globalization, are driving the growth of the fashion and luxury retail market across the globe.
Given the industry’s tailwinds, investors could consider buying fundamentally sound retail stocks, Dillard's, Inc. (DDS), Caleres, Inc. (CAL), and H & M Hennes & Mauritz AB (publ) (HNNMY), which shows upward momentum for June.
The growing awareness among consumers about leading luxury brands' market share, growing penetration, and increasing influence on social media and digital platforms are expected to aid the luxury goods market's expansion.
The global luxury goods market is projected to grow at a CAGR of 4.4% to reach $510.06 billion by 2032. As per the report by Statista, the number of users in the luxury fashion market is expected to amount to 586.60 million users by 2029. Revenue in the luxury fashion market is expected to grow at a CAGR of 10.1%, resulting in a projected market volume of $33.03 billion by 2029.
Additionally, the increasing penetration of technology in the fashion industry for efficiency in operations is driving the growth of the AI in fashion market. The rise in the fashion industry and the increasing demand for customized apparel trends are boosting the growth market. The global AI in fashion market is estimated to hit around $49.07 billion by 2033, with a CAGR of 41% from 2024 to 2033.
Considering these encouraging trends, let’s take a look at the fundamentals of the three best Fashion & Luxury industry stocks, beginning with the third choice.
Stock #3: Dillard's, Inc. (DDS)
DDS operates retail department stores in the southeastern, southwestern, and midwestern areas of the United States. The company's stores offer merchandise, including fashion apparel for women, men, and children; and accessories, cosmetics, home furnishings, and other consumer goods.
On May 22, 2024, DDS launched DANNIJO for Gianni Bini, a limited-edition fashion, in collaboration with Florida-born sisters Danielle Snyder and Jodie Snyder Morel. Renowned for their signature silk slips, statement jewelry and arm parties, the DANNIJO sisters bring their expertise to a captivating range of designs for Gianni Bini.
This comprehensive, limited-edition collection offers exclusive, summer-ready selections of ladies’ apparel, swimwear, footwear, and jewelry, as well as girls’ apparel and footwear.
On April 23, DDS launched M.G. Style for Antonio Melani, a limited-edition capsule collection by Birmingham-based premier stylist and wardrobe consultant Mary Glenn McElveen. The line consists of multiple, coordinating presentations of separates, dresses, swimwear, and shoes and is available in Dillard’s stores across the nation and online at dillards.com.
DDS’ trailing-12-month gross profit margin of 41.50% is 12.7% higher than the industry average of 36.83%. Also, the stock’s trailing-12-month EBIT margin and EBITDA margin of 12.84% and 15.47% are favorably compared to the industry averages of 7.80% and 11.09%, respectively.
For the first quarter that ended May 4, 2024, DDS reported net sales of $1.55 billion. Its net income came in at $180 million, and earnings per share was reported at $11.09. In addition, as of May 4, 2024, the company’s total assets stood at $2.71 billion, compared to $2.50 billion as of April 29, 2023.
Analysts expect DDS’ revenue for the year ending January 2026 to increase marginally year-over-year to $6.61 billion. Street expects its EPS to be $31.61 for the same year. Moreover, the company surpassed consensus EPS estimates in each of the trailing four quarters, which is promising.
DDS’ stock has soared 30.3% over the past nine months to close the last trading session at $433.12. The stock is trading above its 200-day moving average of $380.42, indicating an uptrend.
DDS’ POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has an A grade for Quality and a B for Momentum and Value. It is ranked #8 in the 60-stock A-rated Fashion & Luxury industry.
Beyond what is stated above, we’ve also rated DDS for Growth, Stability, and Sentiment. Get all DDS ratings here.
Stock #2: Caleres, Inc. (CAL)
CAL engages in the retail and wholesale of footwear business in the United States, Canada, East Asia, and internationally. It operates through Famous Footwear and Brand Portfolio segments.
On May 23, 2024, CAL declared a regular quarterly cash dividend of $0.07 per share, payable on June 20, 2024. The company pays $0.28 annually, which translates to a yield of 0.79% on the prevailing price level. Its four-year average dividend yield is 1.43%.
On April 2, CAL’s portfolio brand, the American heritage fashion footwear brand Dr. Scholl’s Shoes, launched a special collaboration with Free People as part of its 100th anniversary celebrations. To honor this milestone, Dr. Scholl’s Shoes partnered with a series of iconic brands throughout the year, starting with Free People during festival season.
CAL’s trailing-12-month gross profit margin of 44.83% is 21.7% higher than the industry average of 36.83%. Its trailing-12-month ROCE of 33.40% is 187.3% higher than the 11.63% industry average. Also, the stock’s trailing-12-month net income margin of 6.08% is 30.1% higher than the 4.68% industry average.
CAL’s net sales from famous footwear amounted to $349.55 million, indicating a marginal year-over-year increase in the first quarter that ended May 4, 2023. For the same quarter, the company’s gross profit increased 2.1% year-over-year to $309.10. As of May 4, 2024, the company’s total assets stood at $1.86 billion, compared to $1.81 billion as of April 29, 2023.
Analysts expect CAL’s revenue for the second quarter (ending July 2024) to increase 4.2% year-over-year to $724.88 million. For the same quarter, the company’s EPS is expected to increase by 24.5% year-over-year to $1.22. Moreover, the company surpassed the consensus EPS estimates in each of the trailing four quarters.
Shares of CAL have gained 85.2% over the past year to close the last trading session at $35.59. The stock is trading above its 200-day moving average of $31.98, indicating an uptrend.
CAL’s POWR Ratings reflect bright prospects. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
CAL has a B grade for Value, Quality, and Momentum. It is ranked #6 in the same industry.
In addition to the POWR Ratings highlighted above, one can access CAL’s ratings for Growth, Stability, and Sentiment here.
Stock #1: H & M Hennes & Mauritz AB (publ) (HNNMY)
Headquartered in Stockholm, Sweden, HNNMY provides clothing, accessories, footwear, cosmetics, home textiles, and homeware for women, men, and children worldwide.
HNNMY’s trailing-12-month asset turnover ratio of 1.33x is 34% higher than the industry average of 0.99x. Likewise, its trailing-12-month Return on Common Equity and Return on Total Capital of 19.17% and 8.13% are 64.9% and 31% higher than the industry averages of 11.63% and 6.21%, respectively.
HNNMY’s net sales for the fiscal first quarter that ended February 29, 2024, stood at SEK53.67 billion ($5.02 billion). Its gross profit rose 6.8% year-over-year to SEK27.66 billion ($2.59 billion).
Moreover, its profit for the period attributable to shareholders of HNNMY stood at SEK1.21 billion ($113.02 million), up 123.5% from the year-ago quarter. Also, its earnings per share increased 127.3% over the prior-year quarter to SEK0.75.
Analysts expect HNNMY’s revenue for the quarter ended May 2024 to increase 4.3% year-over-year to $5.67 billion. Over the past three months, the stock has gained 30.7%, closing the last trading session at $3.49. The stock is trading above its 200-day moving average of $3, indicating an uptrend.
HNNMY’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
HNNMY has an A grade for Quality and a B for Momentum and Stability. The stock is ranked #5 in the same industry.
Click here to access the additional HNNMY ratings (Growth, Value, and Sentiment).
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HNNMY shares were trading at $3.47 per share on Tuesday afternoon, down $0.02 (-0.67%). Year-to-date, HNNMY has gained 1.60%, versus a 11.52% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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