The luxury goods market is expected to continue to grow in the upcoming years, driven by the strong demand from affluent consumers, changing consumer preferences, and the rise of e-commerce.
Given this backdrop, investors could consider buying luxury stocks such as The TJX Companies, Inc. (TJX), Ralph Lauren Corporation (RL), and Ross Stores, Inc. (ROST), to add some glamour to their portfolio.
Despite economic downturns and global uncertainties, the luxury market has continued to thrive thanks to the resilient demand for luxury goods among affluent consumers with a strong purchasing power. Besides that, the growing middle class have also contributed to the demand for luxury goods, as they look to own premium and high-quality products.
Furthermore, driven by changing consumer preferences and lifestyles, consumers are increasingly seeking unique and exclusive products, personalized experiences, and sustainable and ethical brands. With the rise of e-commerce and digital platforms, online retail has become increasingly popular among consumers and the convenience of shopping online, coupled with the ability to reach a wider audience, has helped luxury brands maintain sales and reach new customers.
Additional factors like early holiday discounting strategies by premier fashion retailers, technological advancements, social media campaigns, and celebrity endorsements have been identified as contributing to the luxury fashion sector. The luxury apparel market is estimated to reach $151.32 billion by 2029, growing at a 6.6% CAGR.
Considering these conducive trends, let’s examine the fundamentals of the three featured Fashion & Luxury stocks, beginning with the third choice.
Stock #3: The TJX Companies, Inc. (TJX)
TJX operates as an off-price apparel and home fashion retailer in the U.S., Canada, Europe, and Australia. It operates through four segments: Marmaxx, HomeGoods, TJX Canada, and TJX International.
On June 7, 2024, TJX announced that it entered into a definitive agreement for a joint venture with Grupo Axo, S.A.P.I. de C.V., under which TJX would own 49% and Axo would own 51% of the joint venture. The joint venture would comprise Axo’s off-price, physical store business in Mexico, which includes a total of over 200 stores. The transaction is expected to close later this year.
On April 25, 2024, TJX announced the launch of its inaugural team of style experts: Marshalls Good Stuff Style Collective, starring industry's top stylists, Zerina Akers, Enrique Melendez and Molly Dickson, embarking on this partnership to share their fashion expertise and styling advice for shoppers everywhere.
TJX’s trailing-12-month CAPEX/Sales of 3.24% is 7.9% higher than the industry average of 3%. Similarly, its trailing-12-month EBIT margin and net income margin of 10.86% and 8.47% are 39.1% and 76.2% higher than the industry averages of 7.81% and 4.81%, respectively.
TJX’s net sales for the fiscal first quarter that ended May 4, 2024, amounted to $12.48 billion, up 5.9% year-over-year. Its cash and cash equivalents at end of period grew marginally from the year-ago quarter to $5.06 billion. The company’s net income and earnings per share stood at $1.07 billion and $0.93, up 20.1% and 22.4% over the prior-year quarter, respectively.
For the quarter ending July 31, 2024, TJX’s revenue and EPS are expected to increase 4.4% and 7.6% year-over-year to $13.32 billion and $0.91, respectively. It surpassed consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive. The stock has gained 35.7% over the past year to close the last trading session at $110.26.
TJX’s POWR Ratings reflect its robust prospects. It has an overall B rating, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
TJX has a B grade for Momentum and Quality. Within the A-rated Fashion & Luxury industry, it is ranked #23 out of 60 stocks. Click here to see TJX’s Growth, Value, Stability, and Sentiment ratings.
Stock #2: Ralph Lauren Corporation (RL)
RL designs, markets, and distributes lifestyle products in North America, Europe, Asia, and internationally. The company offers apparel, including a range of men's, women's, and children's clothing, footwear and accessories, home products, and fragrances.
On June 18, 2024, RL unveiled Team USA’s Opening and Closing Ceremony Parade uniforms for the Olympic and Paralympic Games Paris 2024, returning for the ninth time as an Official Outfitter of Team USA to dress the nation’s best and brightest athletes.
RL’s Team USA uniforms celebrate classic styles that are made to be loved and endure for generations while showcasing iconic American style on the unparalleled global stage.
On March 14, 2024, RL’s Ralph Lauren Fragrances launched POLO EST. 67 EAU DE TOILETTE, reigniting the POLO fragrance franchise by bringing an athletic spirit to the iconic collection. A new global advertising campaign celebrated the power of dreaming through determination and grit, and featured New York Yankees team captain, Aaron Judge.
RL’s trailing-12-month levered FCF margin of 12.25% is 123.3% higher than the industry average of 5.49%. Likewise, its trailing-12-month Return on Total Capital and Return on Total Assets of 9.53% and 9.79% are 50.1% and 130.5% higher than the industry averages of 6.31% and 4.25%, respectively.
For the fiscal fourth quarter that ended March 30, 2024, RL’s net revenues and adjusted operating income stood at $1.57 billion and $137 million, up 1.8% and 82.9% year-over-year, respectively. For the same quarter, its adjusted net income and net income per common share increased 83.6% and 90% over the prior-year quarter to $111.80 million and $1.71, respectively.
Street expects RL’s EPS for the quarter ending June 30, 2024, to increase 5% year-over-year to $2.46. Its revenue for the quarter ending September 30, 2024, is expected to rise 3.2% year-over-year to $1.69 billion. The company surpassed consensus EPS and revenue estimates in each of the trailing four quarters. RL has gained 58.6% over the past nine months, closing the last trading session at $181.89.
RL’s POWR Ratings reflect this positive outlook. It has an overall rating of B, equating to Buy in our proprietary rating system.
RL has an A grade for Quality and a B for Growth. It is ranked #20 in the same industry. Get RL’s Value, Momentum, Stability, and Sentiment ratings here.
Stock #1: Ross Stores, Inc. (ROST)
ROST operates off-price retail apparel and home fashion stores under the Ross Dress for Less and dd's DISCOUNTS brand names in the U.S. Its stores primarily offer apparel, accessories, footwear, and home fashions.
On March 11, 2024, ROST opened 11 Ross Dress for Less and seven dd's DISCOUNTS stores in 11 different states in February and March. These new locations were a part of the company's plans to add approximately 90 new stores during fiscal 2024.
ROST’s trailing-12-month asset turnover ratio of 1.48x is 48.3% higher than the industry average of 0.99x. Its trailing-12-month Return on Common Equity and Return on Total Assets of 43.02% and 13.74% are 268.6% and 223.6% higher than the industry averages of 11.67% and 4.25%, respectively.
ROST’s sales for the fiscal first quarter that ended May 4, 2024, increased 8.1% year-over-year to $4.86 billion. Its net earnings rose 31.5% from the year-ago quarter to $487.99 million. Also, its earnings per share grew 33.9% year-over-year to $1.46. As of May 4, 2024, ROST’s total assets amounted to $14.49 billion, compared to $13.62 billion as of April 29, 2023.
Analysts expect ROST’s revenue and EPS for the quarter ending July 31, 2024, to increase 6.1% and 12.4% year-over-year to $5.24 billion and $1.48, respectively. The company surpassed the Street revenue and EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 37.9%, closing the last trading session at $148.69.
ROST’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, equating to Buy in our proprietary rating system.
It has a B grade for Momentum, Sentiment, and Quality. It is ranked #17 in the Fashion & Luxury industry. Click here for the additional POWR Ratings of ROST (Growth, Value, and Stability).
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TJX shares were trading at $110.90 per share on Thursday afternoon, up $0.64 (+0.58%). Year-to-date, TJX has gained 19.07%, versus a 15.33% rise in the benchmark S&P 500 index during the same period.
About the Author: Neha Panjwani
From her school days, Neha harbored a profound fascination for finance, a passion that steered her toward a career as an investment analyst following the completion of her bachelor's degree in commerce. Currently enrolled in the CFA program, Neha is dedicated to further enriching her comprehension of investment fundamentals. Neha's primary objective is to aid retail investors in discerning optimal investment opportunities by diligently evaluating crucial aspects of financial instruments, with a primary focus on stocks and ETFs. Her commitment lies in empowering individuals to make informed and strategic investment decisions in the dynamic world of finance.
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