The fashion industry is anticipated to survive due to better reliance on technology and the expanding dominance of fashion trends. So, investors interested in investing in quality luxury brand stocks can consider buying The TJX Companies, Inc. (TJX), H & M Hennes & Mauritz AB (publ) (HNNMY), and Chico’s FAS, Inc. (CHS).
The global luxury goods market is expected to reach $392.40 billion by 2030, growing at a CAGR of 4.7%. This expansion can be linked to various factors, including rising disposable income, shifting customer preferences, and the popularity of online shopping platforms.
Also, rising markets in Asia-Pacific and Latin America are considerably contributing to the rise of the luxury goods market.
Moreover, the luxury fashion market will be worth $346.39 billion in 2029, growing at a CAGR of 4.0%. Factors including social media campaigns and celebrity endorsements influence the luxury fashion market.
Furthermore, AI is transforming the fashion industry by enabling chatbots, tailored recommendations, and trend predictions. AI models are also impacting supply chain management, with Forbes claiming that AI models are capable of managing massive volumes of data critical for the industry’s success.
Take a detailed look at the stocks mentioned above:
The TJX Companies, Inc. (TJX)
TJX operates as an off-price apparel and home fashion retailer. It operates through four segments: Marmaxx; HomeGoods; TJX Canada; and TJX International. Its product portfolio includes footwear and accessories. It also offers home fashions, such as home basics, furniture, rugs, lighting products, and more.
TJX’s trailing-12-month ROCE of 66.32% is 511.6% higher than the 10.84% industry average. Its trailing-12-month ROTA of 13.76% is 270.6% higher than the 3.71% industry average.
Over the last three years, TJX’s dividend payouts have grown at a 39.7% CAGR. While TJX’s four-year average dividend yield is 1.30%, the company’s annual dividend of $1.33 yields 1.48% at the current price level.
For the second quarter of the fiscal year 2024, which ended July 29, 2023, TJX’s net sales increased 7.7% year-over-year to $12.76 billion, while its income before income taxes rose 22.2% from the year-ago value to $1.33 billion. The company’s net income and EPS amounted to $989 million and $0.85, representing increases of 22.1% and 23.2% from the prior-year quarter, respectively.
The consensus revenue estimate of $53.79 billion for the year ending January 2024 represents a 7.7% increase year-over-year. Its EPS is expected to grow 19.4% year-over-year to $3.71 for the same period. It surpassed EPS estimates in three of four trailing quarters. TJX’s shares have gained 37.2% over the past year to close the last trading session at $88.31.
TJX’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, translating to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
TJX has a B grade for Stability, Sentiment, and Quality. It is ranked #4 out of 66 stocks in the Fashion & Luxury industry. Click here for the additional POWR Ratings for Growth, Value, and Momentum for TJX.
H & M Hennes & Mauritz AB (publ) (HNNMY)
Headquartered in Stockholm, Sweden, HNNMY designs, manufactures, and markets clothing and accessories. Its branded stores span 40+ markets and encompass iconic labels such as H&M, H&M Home, COS, Monki, Weekday, Cheap Monday, and & Other Stories.
HNNMY’s trailing-12-month gross profit margin of 49.66% is 40.6% higher than the 35.32% industry average. Its trailing-12-month asset turnover ratio of 1.26x is 25.3% higher than the 1.01x industry average.
Over the last three years, HNNMY’s dividend payouts have grown at a 7.5% CAGR. While HNNMY’s four-year average dividend yield is 4.20%, the company’s annual dividend of $0.12 yields 4.31% at the current price level.
During the second quarter that ended May 31, 2023, HNNMY’s net sales increased 5.7% year-over-year to SEK 57.62 billion ($5.32 billion). Its gross profit grew 1.6% from the year-ago value to SEK 30.34 billion ($2.80 billion).
Moreover, as of May 31, 2023, the company’s non-current assets stood at SEK 104.61 billion ($9.66 billion), compared to SEK 102.53 billion ($9.46 billion) as of November 30, 2022.
Street expects HNNMY’s revenue to increase 2% year-over-year to $22.05 billion for the year ending November 2023. Over past nine months the stock has gained 26.3% to close the last trading session at $2.79.
HNNMY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It is ranked #16 in the same industry. It has an A grade for Quality and a B for Stability. To see additional HNNMY’s ratings for Growth, Value, Momentum, and Sentiment, click here.
Chico’s FAS, Inc. (CHS)
CHS operates as an omnichannel specialty retailer of women’s private branded casual-to-dressy clothing, intimates, and complementary accessories. The company operates under the Chico’s, White House Black Market (WHBM), and Soma brands.
CSH’s trailing-12-month gross profit margin of 39.72% is 12.4% higher than the 35.32% industry average. Its trailing-12-month net income margin of 5.34% is 27.5% higher than the 4.19% industry average.
In the fiscal first quarter, which ended April 29, 2023, CHS’ total net sales amounted to $534.74 million, while gross profit rose 3.9% from the year-ago value to $225.01 million. The company’s net income came in at $39.91 million and $0.32 per share, up 14.2% and 14.3% from the prior-year quarter, respectively. In addition, its income from operations grew 17.5% from the year-ago value to $53.34 million.
Analysts expect CHS’s revenue to increase marginally year-over-year to $2.17 billion for the year ending January 2024. Its EPS is expected to come in at $0.79 for the same period. It surpassed EPS estimates in three of four trailing quarters. The stock has gained 2.8% over the past six months to close the last trading session at $5.13.
It’s no surprise that CHS has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Value and Quality. It is ranked #3 in the same industry.
Beyond what is stated above, we’ve also rated CHS for Growth, Sentiment, Momentum, and Stability. Get all CHS ratings here.
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TJX shares were trading at $87.94 per share on Friday afternoon, down $0.37 (-0.42%). Year-to-date, TJX has gained 11.79%, versus a 15.37% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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