The apparel industry has been rebounding this year. As people resume outdoor activities and discretionary spending rises, both e-commerce and the brick-and-mortar outlets of apparel companies are seeing sales growth.

The global clothing and clothing accessories stores market is expected to hit $1.2 trillion in 2021, registering a 7.8% CAGR. With more than 5.48 billion COVID-19 vaccine doses administered across 182 countries so far, consumers are expected to be increasingly inclined to shop at brick-and-mortar retail stores. In addition, shifting preferences regarding branded and customized products, and the continuous launch of new fashions supported by aggressive branding, should continue to fuel the industry’s growth.

Given a strong digital presence and established brick-and-mortar chains, we think apparel companies Ralph Lauren Corporation (RL) and Guess', Inc. (GES) should benefit from industry tailwinds. Shares of these two companies are rated B (Buy) in our proprietary POWR Ratings system.

Ralph Lauren Corporation (RL)

RL is a global leader in designing, marketing, and distributing premium lifestyle products in five categories: apparel, accessories, home, fragrances, and hospitality. The New York City company offers its products under the brand names Ralph Lauren Collection, Ralph Lauren Purple Label, Polo Ralph Lauren, Double RL, Lauren Ralph Lauren, Polo Ralph Lauren Children, and Chaps.

Last month, RL collaborated with ZEPETO on a global social networking and avatar simulation app, where users can experience a fully articulated virtual world with a personalized 3D avatar and socialize with others. With this partnership, consumers can purchase RL products, wear them digitally, and experience the brand differently.

RL’s net revenues increased 182.3% year-over-year to $1.38 billion in its  first fiscal quarter, ended June 26, 2021. The company’s gross profit increased 177.6% from its year-ago value to $968.1 million. Also, its operating income came in at $220.6 million, versus a $168 million operating loss in the prior-year quarter.

Analysts expect RL’s revenue to increase 31.1% year-over-year to $5.77 billion in fiscal 2022. The company surpassed the consensus EPS estimates in three of the trailing four quarters. In addition, RL’s EPS is expected to grow 316.5% in the current year. The stock has gained 12.8% in price over the past nine months and 54.8% over the past year.

RL’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.

RL has also rated a B grade for Growth, Momentum, and Quality. Within the A-rated Fashion & Luxury industry, it is ranked #29 of 64 stocks.

To see additional POWR Ratings for Stability, Sentiment, and Value for RL, click here.

Guess', Inc. (GES)

GES is an American clothing and retail brand that  markets and distributes apparel, shoes, accessories, watches, and handbags for men, women, and kids. Americas Retail; Americas Wholesale; Europe; Asia; and Licensing are the five operational segments of the Los Angeles-based company. It directly operated in 1,046 retail stores in America, Europe, and Asia and an additional 524 retail stores worldwide.

In April, GES collaborated with FriendsWithYou, to launch a collection of colorful silhouettes and fabrications. With this introduction, the company believes that the consumers will get a sense of celebration with these new clothes and experience their own creative expression and a fresh new outlook from  artists worldwide.

For its second fiscal quarter, ended July 31, 2021, GES’ revenue increased 57.7% year-over-year to $628.62 million. The company’s total segment earnings from operations increased 353.6% from its  year-ago value to $117.58 million. In addition, GES’ gross profit increased 100% from the prior-year quarter to $294.09 million.

GES’ revenue is expected to increase 35.6% year-over-year to $2.55 billion in its  fiscal year 2022. The company has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. GES’s EPS is expected to increase 3985.7% in the current year. The stock has soared 18.7% in price over the past nine months and 86.1% over the past year.

GES’ POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. GES also has an A grade for Value, and a B grade for Momentum and Growth. In the Fashion & Luxury industry, it is ranked #23 of 64 stocks.

In addition to the POWR Rating grades we’ve just highlighted, one can see GES’ ratings for, Stability, Quality and Sentiment here.

RL shares were unchanged in premarket trading Friday. Year-to-date, RL has gained 10.29%, versus a 21.32% rise in the benchmark S&P 500 index during the same period.

Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research.

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