Sustainable fashion has become a core focus for apparel brands as consumers are increasingly prioritizing ethical and eco-friendly products. Brands are taking steps to integrate sustainability into their core operations and moving toward renewable sources.
Thus, investors looking to shift their portfolios with long-term environmental and financial goals might consider apparel brands like Tapestry, Inc. (TPR), PVH Corp. (PVH), and Nordstrom, Inc. (JWN).
The apparel industry is one of the highest-polluting industries in the world. This is why the global ethical fashion market has been experiencing a notable transformation in the last few years.
A recent survey showed that 75% of respondents expressed how they want to make small changes like buying ethically sourced clothes. With that, brands are leading the change with initiatives ranging from the use of organic cotton to aggressive recycling programs.
The global apparel industry is anticipated to reach $1.78 trillion by 2029, exhibiting at a CAGR of 4.6%, and the global sustainable fashion market is estimated to reach $33.05 billion by 2030, growing at a CAGR of 22.9%.
Sustainability initiatives often lead to long-term financial benefits for companies. By reducing waste, optimizing supply chains, and increasing customer loyalty, apparel brands can improve their profitability.
In light of these encouraging trends, let’s examine the fundamentals of three Fashion & Luxury stock picks, starting with #3.
Stock #3: Tapestry, Inc. (TPR)
TPR is a global powerhouse with iconic accessories and lifestyle brands. The company operates in three brand segments: Coach, Kate Spade New York, and Stuart Weitzman. These brands offer women’s handbags, women’s accessories, men’s products, and more.
TPR achieved the fiscal year 2025 goal of sourcing 97% of its leather from Silver- and Gold-rated LWG tanneries. It also launched a new sub-brand, Coachtopia, with a mission to accelerate the transition toward a circular economy. Tapestry also focuses on using environmentally preferred materials to create more durable finished goods.
In terms of the trailing-12-month net income margin, TPR’s 12.12% is 182.2% higher than the 4.29% industry average. Similarly, its 14.85% trailing-12-month levered FCF margin is 215.8% higher than the industry average of 4.70%. Also, its trailing-12-month ROCE of 29.92% compares to the industry average of 10.61%.
For the fiscal 2025 first quarter that ended on September 28, TPR’s net sales came in at $1.51 billion, while its Coach segment’s sales improved marginally from the prior year’s value to $1.17 billion. Its gross profit rose 3.4% year-over-year to $1.13 billion. Moreover, the company’s net income amounted to $186.60 million, or $0.79 per share.
According to the company’s financial outlook, TPR forecasts fiscal year 2025 revenue over $6.75 billion. In addition, it anticipates its non-GAAP earnings per diluted share to be in the range of $4.50 and $4.55 and free cash flow in the range of approximately $1.1 billion.
The consensus revenue estimate of $2.11 billion for the fiscal first quarter (ending October 2024) represents a marginal increase year-over-year. The consensus EPS estimate of $1.70 for the same quarter indicates a 4.5% improvement year-over-year.
TPR shares have surged 81.2% over the past year and 35.7% over the past three months to close the last trading session at $55.09.
TPR’s stance is apparent in its POWR Ratings. The stock has an A grade for Quality and a B for Sentiment. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
Among the 61 stocks in the B-rated Fashion & Luxury industry, it is ranked #31. Click here to see the additional TPR ratings (Growth, Value, Momentum, and Stability).
Stock #2: PVH Corp. (PVH)
PVH is an international apparel company. The company operates through five segments: Tommy Hilfiger North America; Tommy Hilfiger International; Calvin Klein North America; Calvin Klein International; and Heritage Brands Wholesale. It designs and markets men’s, women’s, and children’s branded apparel, footwear and accessories, underwear, and sleepwear.
The company launched its first sustainable supply chain finance program in fiscal 2022. PVH aims to follow the strictest water safety standards through compliance and to ensure the elimination of hazardous chemicals and microfibers from the water leaving its processing facilities. PVH targets to source 100% renewable electricity in owned and operated facilities by 2030 and expects all its suppliers to meet its environmental standards by 2030.
The stock’s trailing-12-month net income margin of 8.37% is 94.9% higher than the industry average of 4.29%. Similarly, its 6.61% trailing-12-month ROTA is 68.9% above the industry average of 3.91%. Also, its trailing-12-month ROCE of 14.52% compares favorably to the industry average of 10.61%.
PVH’s total revenue for the second quarter (ended August 4, 2024) amounted to $2.10 billion. The company reported a non-GAAP net income of $170.20 million, indicating a 36.8% growth from the prior-year quarter, and its non-GAAP net income per share came in at $3.01, up 52% year-over-year.
Looking ahead, PVH anticipates full-year earnings per share for fiscal year 2024 to fall between $11.20 and $11.45. The company also projects non-GAAP EPS to range from $11.55 to $11.80.
Street expects PVH’s revenue for the fiscal first quarter (ending April 2025) to increase marginally year-over-year to $1.97 billion. Moreover, its EPS estimate of $2.79 for the same period indicates a 13.9% year-over-year growth.
Over the past year, the stock has surged 13.2%, closing the last trading session at $96.08.
PVH’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
PVH has an A grade for Value and a B for Sentiment and Quality. It is ranked #8 out of 61 stocks in the same B-rated industry. Click here to see the additional ratings for PVH (Growth, Momentum, and Stability).
Stock #1: Nordstrom, Inc. (JWN)
JWN is a fashion retailer offering apparel, shoes, beauty, accessories, and home goods for all ages through various channels, Nordstrom and Nordstrom Rack stores, online platforms, and Last Chance clearance outlets.
Nordstrom creates channels to refurbish, reuse, resell, or donate 250 tons of clothing and reduces single-use plastics by 50%. The company’s environmental program continues to focus on water conservation and protecting biodiversity.
JWN's trailing-12-month ROCE and ROTA of 35.02% and 6.63% are 229.9% and 8.4% higher than their respective industry averages of 10.61% and 6.12%. Likewise, its trailing-12-month asset turnover ratio of 1.72x is 71.3% above the industry average of 1.00x.
During the second quarter that ended on August 3, 2024, JWN’s revenue increased 3.2% year-over-year to $3.89 billion. The company’s adjusted EBITDA came in at $379 million, reflecting an increase of 19.9% from the prior-year quarter, with an adjusted EBIT margin of 6.4% (up 110 bps year-over-year). Its adjusted EPS amounted to $0.96, reflecting an increase of 14.3% year-over-year. Also, JWN’s free cash flow rose 37.2% from the year-ago value to $354 million.
For the full year 2024, JWN expects adjusted EBIT margin to fall between 3.6% and 4% and adjusted EPS to range from $1.75 to $2.05.
Analysts expect JWN’s revenue and EPS for the current year (ending January 2025) to be $14.84 billion and $1.90, respectively. For the fiscal year 2026, its revenue and EPS are expected to grow marginally by 5.8% from the prior year to $15.13 billion and $2.01, respectively.
The stock has gained 47.1% over the past year and 10.4% over the past nine months to close the last trading session at $22.19.
JWN’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
JWN has a B grade for Value, Momentum, and Quality. It is ranked #7 in the Fashion & Luxury industry. Click here to see JWN's other ratings for Growth, Stability, and Sentiment.
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TPR shares were trading at $55.09 per share on Wednesday afternoon, down $0.53 (-0.95%). Year-to-date, TPR has gained 53.30%, versus a 24.83% rise in the benchmark S&P 500 index during the same period.
About the Author: ShreyaRathi
