Although apparel retailers bore the brunt of the pandemic-related store closures last year, the speedy COVID-19 vaccine rollout and substantial increase in consumer spending have helped the industry’s sales rebound strongly this year. According to…
the chief U.S. economist at PNC, the outlook for consumer spending is expected to remain “positive.” Even though the worries over the COVID-19 Delta variant dampened spending activity slightly in July, clothing and accessories store sales were up 43.4% year-over-year.
The global apparel market is expected to hit $842.7 billion in 2025, registering a 9.8% CAGR. A shift in preference to branded products, aggressive branding by retail apparel operators, and strengthening e-commerce platforms are expected to propel the industry’s growth.
Thus, Wall Street analysts are bullish about the upside potential of several fundamentally sound apparel retailers. For instance, they expect Adidas AG (ADDYY), Lands’ End, Inc. (LE), and Citi Trends, Inc. (CTRN) to rally by more than 75% in price in the near term.
Adidas AG (ADDYY)
Based in Germany, ADDYY is one of the world’s most prominent sportswear designers and manufacturers. The segments through which the company operates are Europe; North America Adidas; North America Reebok; Asia-Pacific; Russia/CIS; Latin America; Emerging Markets; Adidas Golf; Runtastic; and Other. ADDYY markets its products through mono-branded franchise stores, 2,500 own retail stores, wholesale distributions, and e-commerce sites.
In June, through its new growth strategy, “Own the Game,” ADDYY launched a new share buyback program with the approval of its Supervisory Board. Under the program, the company will buy back shares worth up to €550 million ($649.85 million) through l year’s end. ADDYY is expected to strengthen its financial profile and establish a freer cash-flow-generating business with this share buyback.
ADDY’s net sales for the second quarter, ended June 30, 2021, increased 51.5% year-over-year to €5.08 billion ($6 billion). The company’s gross profit increased 53% from the year-ago value to €2.63 billion ($3.11 billion). Its net income came in at €407 million ($480.89 million), versus a €317 million ($374.55 million) net loss in the second quarter of 2020. Furthermore, its operating profit stood at €543 million ($641.58 million) for the quarter, compared to a €263 million ($310.75 million) operating loss in the prior-year period.
Analysts expect ADDY’s revenue for its fiscal year 2022 to be $24.08 billion, representing 10.6% year-over-year growth. The company’s EPS is expected to increase 323.7% in the current year. The stock has gained 16.1% in price over the past year and 10.9% over the past nine months.
All three Wall Street analysts that have provided ratings for the stock rated it Buy. Closing yesterday’s trading session at $177.5, the average analyst price target of $373.90 represents a 110.7% potential gain.
ADDYY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Also, the stock has a B grade for Momentum and Quality. We’ve also graded ADDYY for Growth, Value, Sentiment, and Stability. Click here to access all ADDYY’s ratings. ADDYY is ranked #19 of 35 stocks in the A-rated Athletics & Recreation industry.
Lands’ End, Inc. (LE)
Clothing, accessories, and home decor retailer, LE operates through Japan e-commerce; Europe e-commerce; US e-commerce; Third-Party; Retail segments; and Lands’ End Outfitters. The Dodgeville, Wis.-based company markets its products through the landsend.com website, direct mail catalogs, retail stores, and third-party websites.
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