3 Apparel Stocks to Buy This Holiday Season and 1 to Sell

The apparel industry continues to grow, thanks to the increase in online shopping demand. Increased online presence has helped manufacturers expand their regional consumer base.

The increase in per capita income, the favorable demographics, and the movement in consumer preference toward branded goods should significantly drive the industry’s growth. According to Data Bridge Market Research, the apparel market is expected to reach $815.08 billion by 2030, growing at a CAGR of 4.2%.

Furthermore, despite the recent inflationary pressures, holiday spending is expected to remain resilient. Based on the latest forecast by the National Retail Federation, holiday retail sales during November and December will advance between 6% and 8% over the last year to $942.60 - $960.40 billion.

“In the face of challenges, many households will supplement spending with savings and credit to provide a cushion and result in a positive holiday season,” said NRF President and CEO Matthew Shay.

Given the industry’s growth prospects, fundamentally sound apparel stocks Dillard's, Inc. (DDS), Hugo Boss AG (BOSSY), and J. Jill, Inc. (JILL) could be solid buys this holiday season. However, given American Eagle Outfitters, Inc.'s (AEO) fundamental weakness and bleak growth prospects, the stock might be best avoided now.

Stocks to Buy:

Dillard's, Inc. (DDS)

DDS is a retailer of cosmetics, clothing, and furniture. The company operates through two segments: the Operation of Retail Department Stores and a General Contracting Construction Company. It runs roughly 280 Dillard's stores, 30 clearance centers, and an online site with a wide variety of goods.

On November 17, the Board of Directors declared a quarterly cash dividend of $0.20 per share on the company's Class A and Class B Common Stock. The dividend is payable on January 30, 2023, to shareholders of record as of December 30, 2022.

The company also announced that the Board of Directors declared a special dividend of $15.00 per share on the company's Class A and Class B Common Stock. The dividend is payable on January 9, 2023, to shareholders of record as of December 15, 2022.

On August 15, DDS announced the launch of Courtney Grow for Antonio Melani. It includes exclusive dresses, sportswear, coats, shoes, and a purse that has been expertly picked for fall and transitional dressing.

Courtney Grow for Antonio Melani is one of Dillard's limited-edition collaborations with highly regarded social media influencers with many engaged fashion followers. Through distinctive and intriguing relationships with tastemakers, this project aims to increase fashion enthusiasm and brand awareness, bringing in new customers while enhancing adherence to Dillard's exclusive brands.

For the fiscal 2023 third quarter ended October 29, 2022, DDS’s net sales increased 4.9% year-over-year to $1.54 billion, while its EPS grew 11.7% from the year-ago value to $10.96. The company’s current assets came in at $2.52 billion, up 5.8% year-over-year, and its total assets increased 1.4% from the previous year to $3.79 billion.

The company has raised its dividend for 11 consecutive years. It pays a $0.80 per share dividend annually, which translates to a 0.21% yield on the current price. Its four-year average dividend yield is 2.14%. DDS’s dividend payouts have grown at a CAGR of 21.1% over the past three years.

For the fiscal year ending January 2023, analysts expect DDS’s revenue to increase 5% year-over-year to $6.96 billion. The company’s EPS for the current fiscal year is expected to grow 6.5% from the prior year to $42.64. The company has surpassed its consensus EPS estimates in each of the trailing four quarters.

The stock has gained 20.2% over the past month and 49.1% year-to-date to close the last trading session at $373.67.

DDS’s POWR Ratings reflect its strong outlook. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each weighted to an optimal degree.

The stock has an A grade for Quality and a B for Value. Within the Fashion & Luxury industry, it is ranked #4 of 66 stocks.

Click here to see the additional POWR Ratings of DDS for Growth, Momentum, Sentiment, and Stability.

Hugo Boss AG (BOSSY)

BOSSY, headquartered in Germany, sells shoes, accessories, and licensed goods like eyeglasses, watches, fragrances, and children's clothing. It also sells business, casual, athleisure, and evening attire. The company's portfolio of brands includes HUGO, BOSS, BOSS Orange, and BOSS Green.

On October 4, BOSSY announced their collaboration with Imaginary Ones on a comprehensive 360-degree metaverse experience. Miah Sullivan, Senior Vice President of Global Marketing & Brand Communications at BOSSY, said: “The metaverse is an exciting new space for fashion brands, one that is rich with potential for HUGO.”

“We are excited to partner with Imaginary Ones to deliver an NFT collection of beautiful 3D assets that enables us not only to explore this virtual world further but also to share a message of self-acceptance and to be true to yourself, which is at the heart of what HUGO stands for”, he added.

The launch of BOSSY's first-ever NFT collection in 2022 will be a significant turning point in the brand's global refresh. And this partnership will enable BOSSY to advance its exploration of the metaverse.

For the fiscal 2022 third quarter ended September 30, 2022, BOSSY’s revenue came in at €933 million ($972.09 million), a 24% increase year-over-year. Its gross earnings increased 22% year-over-year to €567 million ($590.75 million). The company’s EBIT grew 8% year-over-year to €92 million ($95.85 million). Its EPS increased 10% year-over-year to €0.84.

The company pays a $0.15 per share dividend annually, which translates to a 1.42% yield on the current price. Its four-year average dividend yield is 2.48%.

Analysts expect BOSSY’s revenue for the current fiscal year (ending December 31, 2022) to increase 20.5% year-over-year to $3.69 billion. The company’s revenue for the next fiscal year is expected to grow 5.5% from the prior year to $3.89 billion. Moreover, the company has topped the consensus revenue estimates in three of the trailing four quarters.

The stock has gained 13.1% over the past month to close the last trading session at $10.54.

BOSSY’s POWR Ratings reflect its strong outlook. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.

The stock has an A grade for Quality and a B for Value and Stability. Within the Fashion & Luxury industry, it is ranked #2 of 66 stocks.

Click here to see the additional POWR Ratings of BOSSY for Growth, Momentum, and Sentiment.

J.Jill, Inc. (JILL)

JILL is an omnichannel retailer of women's clothing, emphasizing the 45+ age segment. The business sells its goods through retail locations, a website, and catalogs. It runs an e-commerce website and 249 outlets across the country.

Claire Spofford, President and CEO of JILL, said, “As we look to the remainder of the year, we plan to continue to execute against our initiatives, including investing in our plans for long-term profitable growth while remaining prudent with our expectations related to the consumer.”

“As part of our growth strategy, we focus on modernizing the J. Jill brand to increase relevance with both new and loyal customers. We recently announced our ‘Welcome Everybody’ campaign focused on delivering an elevated shopping experience online and in stores that celebrate the totality of all women.” she added.

For the fiscal 2023 second quarter ended July 30, 2022, JILL’s net sales increased 0.7% year-over-year to $160.34 million, while its gross profit grew 2.9% from the year-ago value to $112.47 million. Its operating income increased 19.9% year-over-year to $28.19 million.

Furthermore, the company’s net income was $17.80 million, compared to a net loss of $24.60 million in the second quarter of fiscal 2021. Its adjusted net income per share came in at $1.24, up 33.3% year-over-year.

Analysts expect JILL’s revenue for the fiscal year ending January 2023 to increase 4% year-over-year to $608.80 million. The company’s EPS for the ongoing year is expected to increase 26.8% from the previous year to $2.70. In addition, the consensus revenue and EPS estimates of $633.90 million and $3.06 for the fiscal year 2024 indicate increases of 4.1% and 13.3% year-over-year, respectively.

The stock has gained 26% over the past month and 47.6% over the last year to close the last trading session at $25.07.

JILL’s POWR Ratings reflect its strong prospects. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.

The stock has an A grade for Quality and Sentiment and a B for Value. JILL has topped among 66 stocks in the Fashion & Luxury industry.

Click here to see the additional POWR Ratings of JILL for Growth, Momentum, and Stability.

Stock to Sell:

American Eagle Outfitters, Inc. (AEO)

AEO is a specialty retailer that offers men's and women's clothing, accessories, and personal care items. It operates through two segments: American Eagle and Aerie. AEO provides shipping for more than 81 countries worldwide through its websites and stores in the United States, Canada, Mexico, and Hong Kong.

Inflationary pressures and other economic challenges continue to afflict AEO. Instead of the initial objective of $60 million, AEO is now focusing on cost-cutting strategies to save $100 million this year. Payroll, corporate costs, professional services, and advertising are vulnerable to cost-cutting initiatives. Following the cost-cutting plan, AEO also suspended its quarterly cash payout.

For the third quarter of fiscal 2022 ended September 30, AEO’s net revenue has decreased 2.6% year-over-year to $1.20 billion. Its gross profit of $479.77 million compared to $564.52 million in the prior-year quarter. Its net income declined 46.6% year-over-year to $81.27 million, while its net income per share was $0.42, down 43.2% year-over-year.

Analysts expect AEO’s revenue for the fiscal year ending January 2023 to decrease 1.4% year-over-year to $4.94 billion. The company’s EPS for the ongoing year is expected to decline 60.5% from the previous year to $0.87. Shares of AEO have slumped 45.1% over the past year to close the last trading session at $15.80.

AEO’s poor prospects are also apparent in its POWR Ratings. The stock has an overall D rating, which equates to a Sell in our proprietary rating system.

The stock has a D grade for Stability. Within the Fashion & Luxury industry, it is ranked #58 of 66 stocks.

Beyond what we stated above, we also have AEO’s ratings for Value, Momentum, Sentiment, and Growth. Get all AEO ratings here.

DDS shares were trading at $376.03 per share on Friday afternoon, up $2.36 (+0.63%). Year-to-date, DDS has gained 53.81%, versus a -14.31% rise in the benchmark S&P 500 index during the same period.