lululemon athletica inc. (NASDAQ: LULU) is playing its cards right to remain fashionable and trendy in a starkly competitive apparel market. Product innovation, superior omni-guest experiences and market expansion that form the core of its Power of Three strategy are likely to provide LULU stock an edge over other apparel manufacturers. The company expects to double the sales of its men’s and digital categories, and quadruple sales in the international unit by 2023, through this strategy.
The company is also focused on testing new categories, including the self-care category that it launched in 50 stores and online in mid-June 2019. Additionally, it intends to tap into customers’ growing preference for athleisure, which should intensify its competition with the likes of Nike (NYSE: NKE) and Adidas (OTC: ADDYY). Expansion to office luggage and travel bags as well as outerwear categories are also part of its product-related initiatives.
It is also looking to connect with customers through its loyalty program, which is currently being tested. Moreover, the extension of its “buy online, pick up in store” offering to all of its stores in North America and its improved mobile point-of-sale functionalities indicate that the company is well-positioned to deliver enhanced shopping experiences.
These concrete actions have led to significant growth in its traffic and conversion rates, both in its stores and online. We note that the company’s constant-dollars, comparable in-store sales improved 11%, while its direct-to-consumer sales jumped 31% in the second quarter of fiscal 2019.
Lifted by the factors above, LULU stock has rallied 59% so far this year, compared with the industry’s growth of 13.5%. This Zacks Rank #2 (Buy) stock has also comfortably outperformed the Consumer Discretionary sector and the S&P 500 Index, which advanced 19.7% and 18.5%, respectively, during the same period.
Apparel Makers Have Potential
Apparel companies stand to benefit from high-tech endeavors like upgraded payment systems, buy online and pick-up in store, website improvements, and mobile apps.
Efforts to strengthen brands through marketing strategies, licensing deals, buyouts, innovation and alliances will also go a long way to enhance consumers’ shopping experience. Further, these companies are going all out to expand their international presence, particularly focusing on opportunities in underpenetrated markets.
The U.S.-China trade war and its tariff implications are a potent threat to these companies. However, a favorable consumer environment marked by a strengthening labor market, rising disposable income and upbeat consumer sentiment provide the right background for the growth of this customer-focused sector.
In a nutshell, notable progress on these initiatives and a positive consumer sentiment make apparel makers attractive stocks to buy.
2 More Stocks to Buy
We have identified two more apparel stocks to buy that have outperformed the industry in 2019. These stocks also have a Zacks Rank of #1 (Strong Buy) or #2 (Buy) and have delivered positive earnings surprises in the last four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.
Apparel Maker Stock to Buy: V.F. Corp
V.F. Corp. (NYSE: VFC), a designer, manufacturer and seller of branded apparel and related products in the United States and internationally, is a solid bet. The company, with a Zacks Rank of #2 and a long-term earnings growth rate of 10.6%, has an average positive earnings surprise of 9.6% in the last four quarters. Moreover, the Zacks Consensus Estimate for its current-year earnings has improved nearly 1% in the past 60 days. VFC stock has risen roughly 22.1% in 2019.
Apparel Maker Stock to Buy: Columbia Sportswear Company
Investors may also count on outdoor and active lifestyle apparel, footwear, accessories, and equipment company Columbia Sportswear (NASDAQ: COLM). This Zacks Rank #1 company has a long-term earnings growth rate of 11.2%. Further, it outpaced the Zacks Consensus Estimate in each of the last four quarters. Analysts’ average estimate for its current-year earnings has risen 4.4% in the past 60 days. The stock has rallied about 13.4% in 2019.
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