With inflation losing its grip over the economy, in this article, we delve into the compelling reasons why exploring investments in luxury apparel and footwear could offer a blend of style and strategy for investors and why Hugo Boss AG (BOSSY), Weyco Group, Inc. (WEYS), and J.Jill, Inc. (JILL) might be solid additions to your portfolio right now.
The United States is slowly coming out of the inflationary period. The Consumer Price Index (CPI) for July rose 3.2% from the year-ago value, lower than the 3.3% forecast. Moreover, the core Personal Consumption Expenditures (PCE) price index for June rose 4.1% from a year ago, marking the slowest rise since September 2021.
On the other hand, U.S. retail sales increased by 0.7% in July as Americans boosted their purchases, with clothing store sales increasing by 1%. This underscores a resilient economy and strong consumer demand.
Falling inflation and robust demand are expected to bode well for discretionary items like luxury apparel and footwear. Evidently, the Consumer Discretionary Select Sector SPDR Fund (XLY) gained 30% year-to-date, outperforming the broader SPDR S&P 500 ETF Trust’s (SPY) 15.8% gain over the same period.
Moreover, the luxury apparel and footwear market also shows significant long-term growth prospects. According to Statista, the luxury apparel market would grow annually by 3.2% between 2023 and 2028, while the luxury footwear market is projected to grow annually by 4% over the same period.
Let’s take a closer look at the fundamentals of the stocks stated above.
Hugo Boss AG (BOSSY)
Headquartered in Metzingen, Germany, BOSSY is a global fashion giant that offers diverse clothing, accessories, and licensed products for all genders. Marketed under the BOSS and HUGO brands, its products are sold through various channels, including stores and online.
On June 1, Metyis, a multinational big data, digital commerce, marketing & design, and advisory services solution provider, opened the Metyis Campus in Gondomar, Portugal. This new hub includes the HUGO BOSS Digital Campus, specializing in eCommerce, advanced business analytics, and technology and data. This is expected to enhance BOSSY’s digital capabilities.
On June 15, BOSSY provided an update on its “CLAIM 5” growth strategy and its 2025 financial ambition. While it aims to achieve its previously announced mid-term sales target of €4 billion ($4.37 billion) this year, BOSSY raised its sales target to €5 billion ($5.46 billion) by 2025, representing an 11% CAGR compared to the fiscal year 2022.
For the fiscal second quarter, BOSSY’s sales increased 16.9% year-over-year to €1.03 billion ($1.12 billion), while its gross profit grew 14.7% from the prior-year quarter to €640 million ($698.70 million).
The company's net income improved 30% from the year-ago value to €78 million ($85.15 million). Also, its earnings per share came in at €1.09, representing a 31.3% increase year-over-year. BOSSY's EBITDA stood at €205 million ($223.80 million), up 5.7% year-over-year.
Street expects BOSSY’s revenue to increase 23.7% year-over-year in the current quarter (ending September 2023) to $1.13 billion. For the fiscal year 2023, its revenue is projected to reach $4.61 billion, registering an increase of 19.4% from the prior-year period. Additionally, it topped the revenue estimates in each of the trailing four quarters, which is impressive.
The stock has gained 57.8% over the past nine months and 30.5% year-to-date to close the last trading session at $15.12.
BOSSY’s POWR Ratings reflect solid prospects. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
BOSSY also has a B grade for Growth, Stability, and Quality. It is ranked first out of 66 stocks in the B-rated Fashion & Luxury industry. Click here to see the other ratings of BOSSY for Value, Momentum, and Sentiment.
Weyco Group, Inc. (WEYS)
WEYS is a renowned footwear design and distribution company. It operates through its North American Wholesale Operations and North American Retail Operations segments. The company offers a diverse range of footwear under well-known brands like Florsheim, Nunn Bush, Stacy Adams, BOGS, Rafters, and Forsake.
On August 1, WEYS announced a dividend of $0.25 per share, payable to shareholders on September 29, 2023. Its annual dividend of $1.00 yields 3.91% on prevailing prices, while its four-year average dividend yield is 4.31%.
For the fiscal second quarter that ended June 30, 2023, WEYS’ net sales amounted to $67.01 million, while its earnings from operations increased 18.3% year-over-year to $6.70 million. The EPS came in at $0.50, representing an increase of 6.4% from the prior-year quarter.
WEYS’ net earnings increased 8.2% year-over-year to $4.86 million. Its cash and cash equivalents at the end of the period stood at $21.96 million, up 188.1% year-over-year.
WEYS’ shares have gained 20.8% year-to-date to close the last trading session at $25.55. The stock also gained marginally intraday.
WEYS’ strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It has an A grade for Value and a B grade for Sentiment. Out of 66 stocks in the same industry, it is ranked #2. To see WEYS’ ratings for Growth, Momentum, Stability, and Quality, click here.
J.Jill, Inc. (JILL)
JILL operates as an omnichannel retailer of women's apparel in the United States. It offers casual wear, athletic wear, loungewear, footwear, and accessories, including scarves and jewelry. The company markets its products through retail stores, websites, and catalogs.
On June 26, the company announced that it had been added to the broad-market Russell 3000® Index, effective since U.S. markets opened on the same day, as part of the 2023 Russell indexes annual reconstitution.
Claire Spofford, President and Chief Executive Officer of JILL, stated, “We are pleased to be included in the Russell 3000® Index. We believe our inclusion in the index will increase awareness within the investment community and provide an opportunity to expand our shareholder base.”
On May 11, JILL announced the successful completion of the refinancing of its Asset-Based Revolving Credit Facility (ABL). The facility consists of a $40 million revolving credit facility maturing in May 2028. This is expected to strengthen the company’s balance sheet.
For the fiscal first quarter that ended April 29, 2023, JILL’s net sales amounted to $149.42 million. Its adjusted income from operations increased 6.9% from the year-ago value to $25.39 million. The adjusted EBITDA came in at $31.86 million, representing a 1.8% increase from the prior-year quarter.
The consensus revenue estimate of $153.60 million for the fourth quarter (ending January 2024) represents a 4% increase year-over-year. The consensus EPS estimate of $0.45 for the same quarter indicates a 309.1% improvement year-over-year. The company has an impressive surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 30.2% to close the last trading session at $22.75. It has gained 18.5% over the past month.
It’s no surprise that JILL has an overall rating of B, which equates to Buy in our proprietary rating system. It has an A grade for Sentiment and Quality and a B for Value. Within the same industry, it is ranked #3.
In addition to the POWR Ratings we’ve stated above, we also have JILL’s ratings for Growth, Momentum, and Stability. Get all JILL ratings here.
What To Do Next?
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BOSSY shares were trading at $15.12 per share on Wednesday afternoon, down $0.38 (-2.45%). Year-to-date, BOSSY has gained 29.57%, versus a 16.62% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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