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Despite the macro challenges, the fashion and apparel industry continues to witness steady demand. According to Adobe, Online shoppers spent a record $5.29 billion by Thanksgiving 2022, a 2.9% year-over-year increase. They spent more on toys, clothing, grills and outdoor gear. “What we’re seeing is that the discounts are strong enough to entice consumers to keep spending,” said Vivek Pandya, principal analyst at Adobe.
This moment is expected to extend into the winter holidays. The National Retail Federation predicts that holiday sales will increase by up to 8% this year.
Moreover, in today’s age of social media marketing, fast fashion is gaining considerable popularity. The global fast fashion market is expected to growing at a CAGR of 8.6% from 2022 to 2026.
Given the background, investors can buy quality J. Jill, Inc. fashion stock.JILL) this holiday season. However, fundamentally weak The Gap, Inc.GPS) can best be avoided.
Stock to buy:
J. Jill, Inc. (JILL)
JILL operates as a women’s apparel retailer under the J. Jill brand in the United States. It offers two sub-brand extensions of its brand aesthetic: Pure Jill and Wearever.
On December 6, 2022, Claire Spofford, President and CEO of JILL, said: “As we look ahead to the remainder of the year, we plan to continue to execute against our initiatives, including investing in our plans for long-term profitable growth, while remaining careful with our expectations regarding the consumer.”
JILL’s EV/Sales forward of 0.86x is 21.27% lower than the industry average of 1.09x. Its forward Price/Sales multiple of 0.41 is 35.9% lower than the industry average of 0.86.
JILL deadline – 12 months gross profit margin of 68.49% is 93.4% higher than the industry average of 35.41%. Its trailing 12-month FCF margin of 12.98% is 927.4% higher than the industry average of 1.26%.
JILL’s gross margin came in at $105.02 million for the third quarter ended Oct. 29, 2022, up slightly year over year. The company’s current assets totaled $184.68 million for the period ended Oct. 29, 2022, compared to $123.25 million for the period ended Jan. 29, 2022.
Analysts expect JILL’s revenue to grow 4.4% year-over-year to $610.70 million in 2023. Its EPS is estimated to grow 37.1% year-over-year to $2.92 in 2023. It has exceeded EPS estimates in all four trailing quarters. Over the past year, the stock has gained 67.9% to close the last trading session at $24.41.
JILL’s strong fundamentals are reflected in it POWR Ratings. The stock’s overall B rating indicates a Buy in our proprietary rating system. The POWR ratings evaluate stocks on 118 different factors, each with its own weight.
JILL has an A grade for feel and quality. It ranks second out of 66 shares in Fashion & Luxury industry. Click here to see additional POWR ratings for JILL (Stability, Growth, Value and Momentum).
Stocks to avoid:
The Gap, Inc.GPS)
GPS is a specialty clothing company offering clothing, accessories and personal care products for women, men and children. The global and versatile retailer markets its offerings under the Old Navy, Gap, Banana Republic and Athleta brands.
GPS’s forward EV/EBIT of 141.29x is 1006.3% higher than the industry average of 12.77x. Its forward EV/EBITDA multiple of 18.06 is 97.36% higher than the industry average of 9.15.
GPS’s trailing 12-month EBITDA margin of 3.34% is 69.8% lower than the industry average of 11.05%. Its trailing 12-month FCF margin of negative 5.29% is significantly lower than the industry average of 1.26%.
GPS’s gross profit came in at $1.51 billion for the third quarter ended September 29, 2022, down 9.2% year over year. The company’s total assets reached $12 billion for the period ended October 29, 2022, compared to $12.78 billion for the period ended October 30, 2021.
The Street expects GPS revenue to decline 5.6% year over year to $15.74 billion in 2023. Over the past year, the stock has lost 14.7% to close the last trading session at $13.91.
GPS POWR ratings are consistent with this grim view. The stock has an overall rating of D, equal to a Sell in our proprietary rating system. Additionally, the stock has a D for Growth and Stability.
It is ranked #59 in the same industry. We’ve also ranked GPS on Growth, Value, Momentum, Sentiment and Quality. Click here to access all GPS ratings.
Shares of JILL were trading at $23.93 per share on Wednesday afternoon, down $0.48 (-1.97%). Year-to-date, JILL has gained 24.77%, versus a -14.82% gain in the benchmark S&P 500 over the same period.
About the Author: RashmiKumari
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 the right investment decisions. More…
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