Many retail stocks are at a low price due to the coronavirus outbreak, but despite closing shops, they are a great buy!
Many of us now resort to buying our clothes online for convenience and with a number of physical stores closing due to the coronavirus pandemic. The garment industry grew by 4.5% in 2019 and is expected to jump by another 5% in 2020, so here are 3 fashion stocks that will benefit from this trend.
The company has positioned itself as a luxury yoga and sportswear brand, competing with some big names like Nike (NYSE: NKE). At its fourth-quarter earnings call for the period ending February 2, Lululemon’s (NASDAQ: LULU) total revenue increased by 19.7% to $1.40 billion. This is great news considering many of the physical stores were closed due to the virus outbreak.
Lululemon’s customers are continuing to shop online and sales jumped 20% in the quarter. The brand has also created a strong sense of community, offering online yoga classes while people are at home. While the share price dropped by 33% over the last month, in the past year the stock has performed well, with an increase of 19%.
As for the future of the brand, Lululemon plans to step into more menswear and beauty products. Before the coronavirus outbreak affected the company, its five year plan wanted to increase its international sales fourfold. There is no doubt Lululemon has outperformed considering the current climate, but the luxury sportswear company did not provide a full-year forecast due to the uncertainty with the virus.
Founded in Eugene, Oregon in 1964 as a small track and field apparel company, Nike is now one of the most recognizable brands in the world. It is endorsed by famous athletes and posts annual revenue of more than $35 billion.
The company has set the bar for other sports brands as it’s stock soared 11% in after-hours trading. At its recent earnings call, Nike made $10.1 billion in revenue for the three months ended in February 2020. The company’s e-commerce sales drove the company as many physical stores closed due to the coronavirus pandemic, with an increase of 35% year on year to $3.8 billion.
Despite the positive earnings call, the company has chosen not to provide guidance for its current quarter because of the virus outbreak. The sportswear giant is in a great position considering the recent market downturn and is a good time to invest in the brand that isn’t a cheap stock!
3. TJX Companies
TJX (NYSE: TJX) decided to close down its shops, which include Marshalls, TJMaxx, and HomeGoods because of the coronavirus. However, the company is in a good position as it continues to offer its heavily discounted products to customers online. TJX also posted a 10% increase in sales year-on-year for its 2019 fourth-quarter.
The company’s share price jumped by 36.5% in 2019 and it also lifted its yearly dividend for 23 years in a row. If TJX’s sales suffer heavily due to the store closures, they are expected to increase once doors open again. In addition, the company has over $3 billion in cash as it waits to see what happens with the coronavirus. TJX recently withdrew its financial guidance for its first quarter of 2020 and is reviewing a number of its expenses.
The company is valued very low at the moment, at around 13 times next year’s earnings. This makes for a good time for investors to get a piece of the stock while the company battles the downturn. TJX is predicted to have increased revenue in the coming years even if there is a recession because of its high comps.
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