Looking Sharp This School Year? Clothing Companies for Back-to-School
Todd is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Summer never seems to last long enough, especially for the students in your life. Sooner than you realize, you'll be hitting the malls to buy the latest styles for school. Your back-to-school shopping helps make the season the third largest for spending each year, trailing only Christmas and Easter. Given the importance of the season, retailers are already filling shelves with back-to-school items hoping to win over early shoppers.
That's good news for clothing makers. Specifically, it may mean stronger revenue and earnings for V.F. Corporation (NYSE: VFC), Oxford Industries (NYSE: OXM), Nike (NYSE: NKE) and Polo Ralph Lauren (NYSE: RL).
While Fool's shouldn't buy and sell their holdings every few months, retail is one of the most seasonally driven industries. As a result, the group often presents a good opportunity to buy ahead of fall. For example, each of these four companies' shares has rewarded investors with third quarter gains in at least 8 of the past 10 years, according to the Seasonal Investor database.
Source: Seasonal Investor database
This clothing maker has high expectations
V.F. Corporation is the company behind popular brands like the North Face and Timberland, which it acquired in 2011. The company's growth-through-acquisition strategy appears to be paying off. In June, the company announced it expects to generate compounded revenue and earnings per share growth of 10% and 13% through 2017, respectively. Those estimates translate into $17.3 billion in sales and earnings of $18 per share. Those are heady goals for the clothing maker.
Importantly, the majority of this growth, some 8%, is expected to come from businesses it already owns, thanks to increasing online sales. Those margin-friendly online sales should climb 25% per year during the period, which is great news for the bottom line.
Summer doesn't have to end August 31st
Oxford Industries' brands include summer time favorite Tommy Bahama, a line of casual clothing designed around cold drinks and island music. Strong sales for Tommy Bahama and the company's casual women's brand, Lily Pulitzer, delivered earnings at the high end of guidance last quarter. Those sales should remain strong thanks to new stores and -- much like V.F. Corporation -- higher online sales. This has analysts boosting their earnings expectations for the coming year.
This track and field star has an opportunity to run higher
Nike's global brand is among the most well-known and trusted, making this footwear and apparel maker a staple on your back-to-school list. Despite slowing sales in struggling China and Europe, Nike sales grew 7% last quarter from a year ago. Strong margins and share buy backs helped earnings per share grow 11%.
Like V.F. Corporation and Oxford Industries, results benefit from increasing direct-to-consumer sales, particularly online. Nike's direct-to-consumer sales were up an impressive 24%, reaching $4.3 billion in fiscal 2013. The company's earnings will continue to benefit as profits are returned to shareholders through an $8 billion buy back authorization announced last fall.
An eventual European recovery should bode well for this well known brand.
Polo Ralph Lauren's polo horse is one of the most recognized logos in clothing, racking up $6.9 billion in sales during fiscal 2013.
The company has been investing in new brick-and-mortar and online stores, which has offset sliding sales in Europe. Those direct-to-consumer sales have widened Polo's operation margins, which climbed 2.7% to 11.1% last year. Wider margins helped Polo generate a record $8 in earnings per share for investors. Polo's wholesale sales may start to pick up again this year, now that inventory in Europe has been worked lower. If they do, the company should have no problem hitting its 4%-7% sales growth target for the year.
The final take
The clothing industry is shifting dramatically as textile makers open new stores and double down on online investments. Those changes are delivering bigger margins and profits for Fools willing to take a longer view. As you peruse the malls, department stores and mobile sites this back-to-school shopping season, you may find it's a good time to consider buying shares in these four companies.
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Todd Campbell has no position in any stocks mentioned. The Motley Fool recommends Nike. The Motley Fool owns shares of Nike. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!