TikTok is stoking some serious nostalgia among American consumers. The social media site that focuses on short videos is creating what’s being called the “nostalgia economy” among young consumers who are hungry for the simpler times enjoyed by Millennials and members of Generation X. It’s also making investors hungry for certain retail stocks.
Videos that focus on jeans, hoodies and jackets from the 1990s and early 2000s are currently all the rage on TikTok. Even compact discs are going viral on the site. And the nostalgia economy is creating some renewed buzz and popularity for clothing retailers whose heyday was more than 15 or 20 years ago.
Here are seven retail stocks to buy for the TikTok induced nostalgia economy.
- Gap (NYSE:GPS)
- Abercrombie & Fitch (NYSE:ANF)
- Ralph Lauren (NYSE:RL)
- Levi Strauss & Co. (NYSE:LEVI)
- Crocs (NASDAQ:CROX)
- Columbia Sportswear (NASDAQ:COLM)
- American Eagle Outfitters (NYSE:AEO)
TikTok Retail Stocks to Buy: Gap (GPS)
Remember the popular advertising campaign from the early to mid-2000s where celebrities such as Willie Nelson and John Mayer told consumers to “fall into the Gap?” That ad campaign led to the sale of a lot of hoodies and jeans about 20 years ago. And nostalgia for those same items is helping to fuel sales at the Gap today.
The company is also generating buzz in the retail world for its Kanye West branded “Yeezy x Gap Perfect Hoodie,” which costs $90 and sold out hours after going on sale at the end of this September. Owing to its strong sales, Gap has raised its full-year guidance and now expects sales to grow by 30% compared to 2020.
Unfortunately the strong sales and buzz have not helped GPS stock, which is down about 8% over the past month to $22.10. The stock is now 40% below its 52-week high of $37.63. While the company’s share price rallied at the start of this year as the U.S. economy began to reopen, it has since fizzled along with stocks across the retail sector. Still, the company is expanding this year, opening 50 new Old Navy and Athleta stores in Canada and the U.S. as the economic reopening gathers momentum.
At its current price, analysts see Gap stock as undervalued. Among the 19 analysts who cover the company, there is a median price target on the stock of $32.00, implying a 40% gain over the coming 12 months.
Abercrombie & Fitch (ANF)
Abercrombie & Fitch isn’t as popular as it was in the 1990s, but its stock still has some pull. Year-to-date, the share price of ANF is up a spectacular 90% to $38.73. However, almost all of that gain came in this year’s first six months. Since July 1, the stock has come down 16% from its peak of $47.29.
The pullback came after the New Albany, Ohio-based company released mixed second quarter financial results that underwhelmed Wall Street. Abercrombie & Fitch announced earnings per share (EPS) that were 145% higher than analysts estimates but revenues that were only 3% above pre-pandemic levels reported in the second quarter of 2019. Online or digital sales held up in the latest period, up 52% compared to Q2 2019.
Despite the downturn and unsettling quarterly results, analysts remain high on ANF stock, with a median price target of $52.50, which would represent a 33% increase over the next year. The company has said it plans to continue focusing on strengthening its online or digital sales coming out of the pandemic, noting that they are more cost-efficient and have helped the company’s operating margin reach its current level of 7.3%, which is substantially higher than the 5% level that most traditional retailers enjoy.
If Abercrombie & Fitch reports stronger earnings across the board for the third quarter when it next announces results on November 22, the share price could rebound.
TikTok Retail Stocks to Buy: Ralph Lauren (RL)
Polo shirts by Ralph Lauren were a status symbol of sorts in the 1980s and the designer helped to popularize the so called “preppy look” that is associated with wealth in America. And Ralph Lauren remains popular today, riding waves of nostalgia that ebb and flow at various times.
Today, RL stock is enjoying a breakout having risen 7% over the last month to $124.22 per share. Year-to-date, the stock is up 20%. The current rally was sparked by the company’s solid fiscal 2022 first quarter performance, with both revenues and earnings per share beating the expectations of Wall Street. The company reported that its revenues grew 182% year-over-year during the quarter, which included a 301% jump in North American sales (the U.S. and Canada combined).
With in-person shopping returning to malls and outlet stores, consumers have been quick to buy Ralph Lauren handbags, shoes and clothing items. The strong fiscal Q1 earnings led the company to raise its full year guidance for revenue growth to between 25% and 30%, having previously forecast growth of about 20% for the year. With the global economy reopening, Ralph Lauren has also doubled its marketing spend this year, sponsoring sporting events ranging from the U.S. Olympic team and the Wimbledon tennis championship to Major League Baseball.
The median price target on RL stock is currently $140 a share, for a potential 13% gain from its current price.
Levi Strauss & Co. (LEVI)
There was a time when Levi was the only name in blue jeans. Before retailers ranging from the Gap to Ralph Lauren started making their own jeans, San Francisco-based Levi, which was founded in 1853, had a corner on the market for denim. There was also a time, in the 1950s, when just wearing blue jeans rather than dress pants or slacks was considered an act of rebellion — especially among teenagers.
Until the 1970s, denim was mostly reserved for blue collar workers who were employed on the docks or in steel foundries. Today, Levi Strauss is having to fight for market share in an increasingly crowded sector for jean pants, shirts and jackets.
And LEVI stock has only been publicly traded since 2019. The 168-year-old company had its first initial public offering (IPO) in 1971 and was actively traded until 1985, when the descendants of company founder and namesake Levi Strauss took the company private in a leveraged buyout. The company then remained privately held for 34 years, returning to the stock market in 2019 just before the pandemic hit.
Year-to-date, Levi Strauss stock is up 31% to $26.22 a share. The company has been putting up strong financials this year. For this year’s third quarter, Levi reported earnings per share (EPS) of $0.48, better than the $0.37 expected by analysts, and revenues of $1.5 billion, which was above the $1.48 billion anticipated.
The median price target on LEVI stock is $35.00, which would represent a 33.5% gain from the current share price.
TikTok Retail Stocks to Buy: Crocs (CROX)
Who would have thought that foam clogs would prove to be so popular? Yet Boulder, Colorado-based Crocs has managed to generate quite a large following for its Crocs footwear. Since they debuted at the Fort Lauderdale Boat Show in Florida back in 2001, Crocs has sold more than 300 million pairs of its foam clogs worldwide.
Today, the company has more than 4,000 employees and generates annual revenues of more than $1.2 billion. While originally popular with adults and senior citizens, Crocs have more recently developed a following among high school students. Strange but true.
And, believe it or not, CROX stock has been a top performer in 2021, up 143% year-to-date at $152.59 per share. In the last 12 months, the stock has risen nearly 200%. Not bad for a shoe that was originally marketed as a niche product and positioned as footwear designed for boating, similar to Top-Siders. For its just released third quarter results, Crocs reported that its revenue rose by 73% to$626 million. Analysts had expected $610 million of revenue.
And despite its stellar gains already this year, Wall Street forecasts more share price appreciation over the next year, with a median target of $180, which would equate to a further 18% gain.
Columbia Sportswear (COLM)
Columbia ski jackets were huge in the 1990s, especially as snowboarding grew in popularity. The company has been around since 1938 and has branched out beyond outerwear to also make and sell camping equipment and hiking shoes. And while the brand’s popularity has faded somewhat, the company’s stock has held up. So far this year, COLM stock has climbed 15% higher to $100 a share.
Since going public in 1998, the company’s share price has returned a 1,175% gain to shareholders.
Despite successfully weathering the pandemic, COLM stock has been the subject of analyst downgrades lately. The most recent knock came from Bank of America (NYSE:BAC), which downgraded Columbia Sportswear to “neutral” from “buy,” and lowered its price target on the stock by $29 to $137 per share. The main concern of Bank of America is that global supply chain constraints and the closures of factories in Vietnam because of Covid-19 will impact the company’s footwear segment.
TikTok Retail Stocks to Buy: American Eagle Outfitters (AEO)
Pittsburgh, Pennsylvania-based American Eagle Outfitters is another clothing retailer that had its heyday in the early and mid-2000s. The company, which targeted teens and young adults with its heavily branded jeans and sweaters had a popularity that rivaled the Gap 15 years ago. While not quite as popular today, American Eagle Outfitters continues to be a mainstay in shopping malls across the U.S. and Canada.
AEO stock has been up-and-down in 2021. While it is still up 21% on the year, the share price has come down 32% over the past six months, including a 13% decline in the last month, and now trades at around $24 per share. Yet despite the downturn, many of the biggest names on Wall Street remain fans of American Eagle Outfitters. CNBC host Jim Cramer recently said he would “double down” on the stock, citing the company’s 3% dividend yield as reasons to hang in with the beaten down security.
Analysts who cover the company are in agreement that AEO stock is grossly undervalued at its current price. The median target on American Eagle Outfitters stock is currently $42, implying a 73.3% gain from where its currently trading.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.