Despite macroeconomic fluctuations, the retail industry has demonstrated strong resilience and stability. Moderating price levels, continued labor market strength, and wage gains have increased consumers’ ability to spend, benefiting retail businesses and their stock prices.
With emerging fashion trends, it could be ideal to buy fundamentally sound retail stocks from the fashion and luxury industry, The TJX Companies, Inc. (TJX), Ross Stores, Inc. (ROST), and Oxford Industries, Inc. (OXM).
According to the latest data from the U.S. Census Bureau, retail sales rebounded in April, reflecting consumer resilience in the face of elevated economic uncertainty, but clothing sales softened. The overall retail sales were up 0.4% from March and 1.6% year over year, while clothing and clothing accessory stores were down 0.3% month over month seasonally adjusted.
However, as heat sets in and Americans enjoy their holidays, summer apparel could witness high demand, with consumers decking out their summer wardrobe. Moreover, with Memorial Day around the corner, several retailers and fashion brands are offering attractive discounts to have shoppers’ carts ready for this major shopping holiday. This should bode well for the industry.
The long-term prospects of the U.S. apparel industry also look bright. The revenue in the apparel market amounts to $343.70 billion in 2023 and is expected to grow annually by 2% over the next four years. Furthermore, the global luxury fashion market is anticipated to expand at a CAGR of 6.2%, reaching $147.54 billion by 2028.
To that end, it could be wise to invest in top fashion companies and their corresponding shares. Let’s look at the above-mentioned stocks in detail:
The TJX Companies, Inc. (TJX)
TJX is an off-price apparel and home fashion retailer in the United States, Canada, Europe, and Australia. It operates through four segments: Marmaxx; HomeGoods; TJX Canada; and TJX International. The company sells family apparel, including footwear and accessories; and home fashions, such as home basics, furniture, rugs, lighting products, etc.
On March 28, TJX announced that its board of directors had increased the amount of its quarterly dividend by 13% from the last paid dividend to $0.3325 per share, payable on June 1, 2023. This marks the company’s 26th dividend increase over the last 27 years.
TJX’s four-year average dividend yield is 1.31%, while its annual dividend of $1.33 translates to a 1.68% yield on prevailing prices. Its dividend payouts have grown at CAGRs of 20.8% and 12.9% over the past three and five years, respectively.
For the first quarter of fiscal year 2024, which ended April 29, 2023, TJX’s net sales increased 3.3% year-over-year to $11.78 billion. The company’s net income and EPS amounted to $891 million and $0.76, representing an increase of 51.8% and 55.1% from the prior-year period, respectively.
During the same period, its cash and cash equivalents amounted to $5.03 billion, up 17% year-over-year.
Street expects TJX’s revenue and EPS for the second quarter of fiscal year 2024 (ending June 30, 2023) to increase 4.5% and 13.8% year-over-year to $12.37 billion and $0.79, respectively. Moreover, it surpassed the EPS estimates in three of the trailing four quarters.
Its revenue and net income have grown at 10.9% and 31.2% CAGR over the past three years, respectively. Over the same period, EPS increased at a CAGR of 32.8%.
TJX’s shares have gained 40.5% over the past year to close the last trading session at $78.95.
TJX’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Growth, Sentiment, and Quality. In the 67-stock B-rated Fashion & Luxury industry, it is ranked #4. To see additional POWR Ratings of TJX for Value, Momentum, and Stability, click here.
Ross Stores, Inc. (ROST)
ROST is engaged in operating off-price retail apparel and home fashion stores under the Ross Dress for Less and dd's DISCOUNTS brand names in the United States. Its stores primarily offer branded and designer apparel, accessories, footwear, and home fashions.
On May 17, the company declared a regular quarterly dividend of $0.335 per common share, payable to its shareholders on June 30, 2023.
ROST has a four-year average dividend yield of 0.91%, while its annual dividend of $1.34 translates to a 1.29% yield on current prices. Its dividend payouts have grown at CAGRs of 6.4% and 12.4% over the past three and five years, respectively.
On March 6, ROST announced that it had opened 11 Ross Dress for Less and eight dd's DISCOUNTS stores in 13 different states in February and March. The expansion of both chains into existing markets aligns with the company’s vision of opening approximately 100 new stores this year.
ROST’s sales increased 3.9% year-over-year to $5.21 billion in the fourth quarter (ended January 28, 2023). The company’s net earnings amounted to $447.04 million and $1.31 per share, representing an increase of 21.9% and 25.9% from the prior-year period, respectively.
Analysts expect ROST’s revenue and EPS for the first quarter (ended April 30, 2023) to increase 3.3% and 8.7% year-over-year to $4.48 billion and $1.05, respectively. In addition, it topped the EPS estimates in three of the trailing four quarters, which is promising.
Its revenue has increased at a CAGR of 5.2% and 5.8% over the past three and five years, respectively, while its total assets have improved at a 12.8% CAGR over the past three years.
Over the past nine months, the stock has gained 11.8% to close the last trading session at $103.79.
ROST’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
It has a B grade for Quality. Within the same B-rated industry, it is ranked #18. Click here to see the other ratings of ROST for Growth, Value, Momentum, Stability, and Sentiment.
Oxford Industries, Inc. (OXM)
Branded apparel company OXM designs, sources, markets, and distributes products bearing the trademarks of its portfolio of lifestyle brands: Tommy Bahama, Lilly Pulitzer, Johnny Was, Southern Tide, TBBC, and Duck Head.
On April 28, OXM paid a quarterly dividend of $0.65 per share, which represents an 18% increase over its previous quarterly dividend rate of $0.55. The company’s annual dividend of $2.60 translates to a 2.39% yield on the prevailing prices, while its four-year average dividend yield is 2.04%.
Its dividend payouts have grown at CAGRs of 19.1% and 14.9% over the past three and five years, respectively.
For the fourth quarter that ended on January 28, 2023, OXM’s net sales increased 27.5% year-over-year to $382.48 million. Its adjusted gross profit grew 27.9% from the year-ago value to $235.10 million.
The company’s adjusted net earnings amounted to $36.50 million and $2.28 per share, representing an increase of 28.5% and 35.7% from the prior-year period, respectively. Also, its adjusted operating income increased 27.7% from the year-ago value to $46.10 million.
The consensus EPS estimate of $3.75 for the first quarter (ended April 30, 2023) represents a 7% improvement year-over-year. The consensus revenue estimate of $419.10 million for the to-be-reported quarter represents an 18.9% increase from the same period last year.
The company has an excellent earnings surprise history, as it surpassed the EPS estimates in each of the trailing four quarters.
OXM’s revenue and net income have increased at CAGRs of 7.9% and 34.3%, respectively, over the past three years, while its EBITDA has improved at a 25% CAGR.
The stock has gained 24.9% over the past year to close the last trading session at $109.
It’s no surprise that OXM has an overall rating of B, which equates to Buy in our proprietary rating system. It has a B grade for Quality. Out of 67 stocks in the same industry, it is ranked #14.
In addition to the POWR Ratings we stated above, we also have OXM’s ratings for Growth, Value, Momentum, Stability, and Sentiment. Get all OXM ratings here.
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TJX shares were trading at $78.59 per share on Thursday afternoon, down $0.36 (-0.46%). Year-to-date, TJX has declined -0.48%, versus a 9.26% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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