Malls may be dead or at least very sick, but, as Lululemon Athletica Inc. (NASDAQ:LULU) Q4 2017 results showed, apparel makers are still very much alive and kicking. And the rally in lululemon stock showed that fitness apparel stocks can still be quite profitable for investors.
As I mentioned previously, lululemon’s apparel is obviously still quite appealing to the many women and the growing number of men who participate in yoga. As a result, the company’s results were quite impressive, and lulu stock rallied.
Two other apparel stocks poised to benefit from strong ongoing trends are Under Armour Inc (NYSE:UA, NYSE:UAA) and Fitbit Inc (NYSE:FIT) Both Under Armour stock and Fitbit stock should get boosts from the popularity of fitness in general and jogging in particular. Additionally, both names have made important strides (pun intended) in recent months in the areas of product and personnel. With all of that said, let’s dive deeper into what makes these apparel stocks shine.
Apparel Stocks to Buy: Lululemon
The company’s apparel is clearly becoming much more popular and profitable, as its earnings-per-share jumped 33% year-over-year, its “normalized gross margin” rose 2% year-over-year, and its e-commerce revenue jumped 42%, excluding currency fluctuations.
Lululemon continues to grow by leaps and bounds abroad, as its comparable store sales jumped 52% in Asia, while its digital comp sales in the country “grew in the triple digits.” And in Europe, Lululemon had “total market growth” of 42% last quarter.
Lululemon’s first quarter guidance was also impressive, as it predicts that its comparable sales will jump by “low double digits,” while its top- and bottom-line guidance came in above expectations. Meanwhile, yoga has become more popular, as Self reported in January. It looks like Lululemon stock will perform very well in coming quarters and years.
Apparel Stocks to Buy: Under Armour
Under Armour stock has struggled in recent years, but it seems like better days are ahead for the company and the stock, driven by powerful growth overseas and strong demand for its new high tech products in the U.S.
There were a number of significant bright spots in the company’s fourth-quarter results, reported in February, including a 9% year-over-year increase in the company’s footwear sales and a 55.7% increase in its Asia-Pacific revenue. Meanwhile, its revenue from the EMEA region jumped 45.5% . As Quartz pointed out in February, “Particularly in China, Under Armour is flourishing … as the world’s most populous country’s middle class grows, giving millions more leisure time and disposable income to spend on activities such as sports, Under Armour is one of the companies riding the wave.”
The magazine, however, added that the company is “struggling greatly in North America.” “Struggling greatly” may be an exaggeration, since the magazine pointed out that the company’s North America revenue slipped 5% last year.
But there is ample reason to believe that help is on the way in North America. Specifically, the company’s high tech, smart running shoes, HOVR, have been getting excellent reviews. For example, arsTechnica’s headline proclaimed that the sneakers are “smarter running shoes, light on gimmicks,” and gushed that ” the new HOVR shoes make a good case for ditching that smart wristband and lacing up a pair of these instead.” And as GDS Investment pointed out, ” The apparel maker’s revenue from connected fitness products jumped 31% year-over-year last quarter, and the unit generated nearly $800,000 of operating profit, versus a $4.3 million loss in the year-earlier period.”
Additionally, last June, Under Armour hired a new president, Patrik Frisk who has some very impressive credentials. According to The Wall Street Journal, Frisk is “credited with spearheading the turnaround of the Timberland brand” and as CEO of privately held shoe retailer Aldo, he “devised a new go-to-market strategy that can turn out product faster than ever.” There is a good chance that Frisk, who will oversee the company’s supply chain and marketing operations, has already had a very positive impact on Under Armour and Under Armour stock and he will continue to do so.
Apparel Stocks to Buy: Fitbit
Like Under Armour stock, Fitbit stock should benefit from the ever increasing popularity of running and fitness tracking. Also like Under Armour, the company’s new product has recieved great reviews, and it has hired strong new leaders.
Specifically, as Barron’s pointed out recently, “the company’s new smartwatch, Versa, has been generally applauded (by reviewers) since its arrival.” The product has recieved much better reviews than its predecessor, the Ionic, Barron’s added.
Moreover, Fitbit recently acquired two new board members, health insurance veteran Brad Fluegel and Zynga Inc (NASDAQ:ZNGA) COO Matthew Bromberg. Fluegel can help Fitbit win more deals from health insurers, while Bromberg can help make the company’s products more appealing to the millennial, gaming generation. Either could easily become CEO if the incumbent, James Park, doesn’t take the steps necessary to turn around Fitbit and Fitbit stock.
As of this writing, Larry Ramer owned shares of Fitbit stock.