The end of an earnings season can be a great time to assess how companies are handling the current business environment and discover new stocks. Let’s take a look at how TJX (NYSE:TJX) and the rest of the apparel and footwear retail stocks fared in Q3.
Apparel and footwear was once a category thought to be relatively safe from major e-commerce penetration because of the need to try on, touch, and feel products, but the category is now meaningfully transacted online. Everyone still needs clothes and shoes to go outside unless they want some curious (or horrified) looks. But this ongoing digitization is forcing apparel and footwear retailers–that once only had brick-and-mortar stores–to respond with omnichannel offerings. The online shopping experience continues to improve and retail foot traffic in places like shopping malls continues to stagnate, so the evolution of clothing and shoes sellers marches on.
The 18 apparel and footwear retail stocks we track reported a decent Q3; on average, revenues beat analyst consensus estimates by 1.8% while next quarter's revenue guidance was 2.1% above consensus. Stocks have been under pressure as inflation (despite slowing) makes their long-dated profits less valuable, but apparel and footwear retail stocks held their ground better than others, with the share prices up 10% on average since the previous earnings results.
TJX (NYSE:TJX)
Initially based on a strategy of buying excess inventory from manufacturers or other retailers, TJX (NYSE:TJX) is an off-price retailer that sells brand-name apparel and other goods at prices much lower than department stores.
TJX reported revenues of $13.27 billion, up 9% year on year, topping analyst expectations by 1.4%. It was a mixed quarter for the company, with a decent beat of analysts' gross margin estimates but underwhelming earnings guidance for the next quarter.
Ernie Herrman, Chief Executive Officer and President of The TJX Companies, Inc., stated, “I am extremely pleased with our third quarter performance and strong execution of our teams as our comp store sales, pretax profit margin, and earnings per share all exceeded our expectations.”
TJX Total Revenue
The stock is down 0.2% since the results and currently trades at $92.31.
Operating under The Gap, Old Navy, Banana Republic, and Athleta brands, The Gap (NYSE:GPS) is an apparel and accessories retailer that sells its own brand of casual clothing to men, women, and children.
Gap reported revenues of $3.77 billion, down 6.7% year on year, outperforming analyst expectations by 4.4%. It was an incredible quarter for the company, with an impressive beat of analysts' earnings estimates.
Gap Total Revenue
The stock is up 54.8% since the results and currently trades at $21.14.
Founded in 1969 as a shoe importer and distributor, Designer Brands (NYSE:DBI) is an American discount retailer focused on footwear and accessories.
Designer Brands reported revenues of $786.3 million, down 9.1% year on year, falling short of analyst expectations by 4.4%. It was a weak quarter for the company, with underwhelming earnings guidance for the full year and a miss of analysts' revenue estimates.
Designer Brands had the weakest performance against analyst estimates and slowest revenue growth in the group. The stock is down 31.5% since the results and currently trades at $8.78.
Known for store associates whose uniforms resemble those of referees, Foot Locker (NYSE:FL) is a specialty retailer that sells athletic footwear, clothing, and accessories.
Foot Locker reported revenues of $1.99 billion, down 8.5% year on year, surpassing analyst expectations by 1.6%. It was a strong quarter for the company, with an impressive beat of analysts' earnings estimates and optimistic earnings guidance for the full year.
The stock is up 27.1% since the results and currently trades at $30.32.
Selling excess inventory or overstocked items from other retailers, Ross Stores (NASDAQ:ROST) is an off-price concept that sells apparel and other goods at prices much lower than department stores.
Ross Stores reported revenues of $4.92 billion, up 7.9% year on year, surpassing analyst expectations by 1.8%. It was an ok quarter for the company, with a decent beat of analysts' revenue estimates. On the other hand, its earnings forecast for next quarter missed analysts' expectations with management expecting decelerating same-store sales growth thanks to the uncertain macro environment.
The stock is up 13.6% since the results and currently trades at $136.47.
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The author has no position in any of the stocks mentioned
