Fitness trends are shifting, and technology is transforming recreational activities. To capitalize on the industry's growth momentum, one could consider adding quality recreation stocks G-III Apparel Group, Ltd. (GIII), Escalade, Incorporated (ESCA), and Vista Outdoor Inc. (VSTO) to their portfolios for robust returns. Let’s understand this in detail.
Fueling the fervor for fitness, the sports industry, which is worth billions, keeps growing every year. It's no surprise that sports play a significant role in our lives and significantly impact our economy. Thanks to technology, sports are more accessible than ever, contributing to the industry's continuous growth.
That being said, Fitch anticipates a stable operating environment for sports in 2024, propelled by robust backing for sports and entertainment at both corporate and individual spending tiers. The significance of sports in the media and cultural landscape further contributes to this stability.
Moreover, the burgeoning athletics and recreation industry is reaping substantial benefits from evolving trends. The surging interest in fitness and wellness is fueling heightened participation in premier exercise programs and cutting-edge equipment, fostering the genesis of innovative fitness initiatives.
Another prominent trend in the sector is the growing demand for virtual fitness programs and online coaching. The paradigm shift is empowering fitness centers to provide remote training sessions, reflecting an adaptive response to changing consumer preferences in the fitness industry.
Moreover, harnessing technological advancements, fitness centers are seamlessly integrating electronic devices for virtual coaching, interactive video games, and meticulous tracking of body metrics. This confluence of inventive gym facilities and technological integration fortifies the industry's appeal.
According to Statista, the worldwide sports equipment market is projected to reach a valuation of over $150 billion by 2023, while the global sports apparel market is expected to reach approximately $200 billion, both exhibiting a reliable upward trend.
Considering this encouraging outlook, let’s look at the fundamentals of the three Athletics & Recreation stocks, beginning with number 3.
Stock #3: G-III Apparel Group, Ltd. (GIII)
GIII designs, sources, and markets both women's and men's apparel. It navigates through two distinct segments: Wholesale Operations and Retail Operations. The company’s merchandise consists of performance wear, dresses, sportswear, swimwear, outerwear, and suits, among other things.
In its fiscal 2024 third-quarter earnings release, GIII showcased robust profitability propelled by wholesale segment strength, astute inventory management, and financial discipline. The success has prompted an upward revision of the annual outlook, reflecting the company's optimistic stance on sustained performance.
For the fiscal 2024 third quarter that ended October 31, 2023, GIII’s gross profit grew 25.8% year-over-year to $433.41 million. Its adjusted EBITDA rose 85% from the prior year’s period to $196.08 million.
In addition, non-GAAP net income attributable to GIII and non-GAAP net income attributable to GIII per common share increased 97.7% and 105.9% year-over-year to $129.63 million and $2.78, respectively.
For fiscal 2024, the company expects net sales of approximately $3.15 billion and net income between $175 million and $180 million, or between $3.75 and $3.85 per diluted share. This compares to net sales of $3.23 billion and a net loss of $133.10 million, or $2.79 per share, for fiscal 2023.
Moreover, GIII foresees non-GAAP net income for fiscal 2024 ranging from $182 million to $187 million, or $3.90 to $4.00 per share. This compares favorably to fiscal 2023's non-GAAP net income of $138.80 million, equivalent to $2.85 per diluted share.
In addition, the company projects full-year adjusted EBITDA for fiscal 2024 in the range of $317 million to $322 million, illustrating a notable uptick from the $266.10 million achieved in fiscal 2023. This outlook reflects GIII's strategic initiatives and operational efficiency, driving enhanced financial performance.
The consensus revenue estimate of $3.23 billion for the fiscal year ending January 2025 indicates a 2.8% year-over-year rise. Likewise, the consensus EPS estimate of $3.96 for the next fiscal period is estimated to grow marginally from the prior year. Moreover, the company surpassed the consensus revenue estimates in three of four trailing quarters.
Shares of GIII have gained 44.5% over the past six months and 96.6% over the past year, closing the last trading session at $29.90.
GIII’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
GIII has an A grade for Value and a B for Growth. It is ranked #6 out of 36 stocks within the Athletics & Recreation industry.
In addition to the POWR Ratings I’ve highlighted, you can see GIII’s Momentum, Stability, Sentiment, and Quality ratings here.
Stock #2: Escalade, Incorporated (ESCA)
ESCA engages in the comprehensive manufacturing, distribution, import, and sale of sporting goods. The company offers a range of sports goods brands, including fitness equipment, basketball goals, archery, and games for both indoor and outdoor use. It also sells workout equipment and play devices.
In August of last year, ESCA unveiled a significant collaboration with The American Cornhole League (ACL), marking its introduction at Academy Sports and Outdoors, a prominent retail player. The strategic partnership could enhance ESCA's market presence.
Moreover, through this manufacturing partnership, ESCA stands to benefit significantly, capitalizing on the increased exposure and distribution channels provided by Academy Sports and Outdoors and reinforcing its position as a leading player in the sporting goods industry.
For the fiscal 2023 third quarter that ended September 2023, ESCA’s operating income rose 52.7% year-over-year to $6.45 million. Its net income and EPS grew 44.5% and 40.9% from the prior year’s period to $4.28 million and $0.31, respectively. Additionally, its cash inflow from operating activities amounted to $27.71 million, compared to a cash outflow of $5.74 million in the previous year’s quarter.
Analysts expect ESCA’s revenue to increase 5% year-over-year to $278.44 million for the fiscal year ending December 2024. Moreover, the company’s EPS for the current year is expected to grow 61.3% from the prior year to $1.29. Likewise, the company surpassed the consensus revenue estimates in three of the trailing four quarters.
The stock has gained 45.9% over the past six months and 63% over the past year to close the last trading session at $19.27.
ESCA’s sound outlook is apparent in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
ESCA has a B grade for Growth and Sentiment. It is ranked #5 out of 36 stocks within the Athletics & Recreation industry.
Click here to access additional ESCA ratings for Value, Momentum, Stability, and Quality.
Stock #1: Vista Outdoor Inc. (VSTO)
VSTO designs, manufactures, and markets an array of outdoor recreation and shooting sports products across two distinctive segments: Sporting Products and Outdoor Products. The company offers its goods on the brand's website and through owned storefronts, in addition to big-box, specialty, independent, and distributor retailers.
On January 3, 2024, Foresight Sports, a key player in professional launch monitors and a VSTO brand, unveiled the Foresight Falcon. The compact device harnesses photometric technology, offering advanced simulation capabilities in a smaller, more powerful form factor. This could elevate VSTO's standing in the virtual sports technology sector.
For the fiscal 2024 second quarter that ended on September 24, 2023, VSTO’s gross profit came in at $208.87 million. Moreover, it registered a net income and earnings per common share of $44.42 million and $0.76, respectively. Furthermore, as of September 24, 2023, the company’s current assets stood at $1.19 billion.
The consensus revenue estimate of $2.88 billion for the fiscal year ending March 2025 indicates a 4.1% year-over-year rise. Similarly, the consensus EPS estimate of $4.46 for the next fiscal year is estimated to rise 19.7% from the previous year. Also, the company topped the consensus revenue and EPS estimates in three of four trailing quarters.
Over the past five days, the stock has gained 3.9%, closing the last trading session at $29.40.
VSTO’s robust prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
VSTO has an A grade for Value and a B for Momentum and Quality. It is ranked #4 within the same industry.
Click here to access the additional VSTO ratings (Growth, Stability, and Sentiment).
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VSTO shares were trading at $29.43 per share on Monday afternoon, up $0.03 (+0.10%). Year-to-date, VSTO has declined -0.47%, versus a 1.80% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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