Fashion Stocks Soar, but Will They Stay Aloft? – WWD

Fashion may be her hardest act to follow.

The industry was largely fueled by COVID-19 uncertainty and an epic backup of the global supply chain last year to record big gains on Wall Street as businesses regroup for the pandemic and beyond.

But while investors can be quick to put companies on a pedestal and keep investing more money in a hot market, they can also turn a penny. And as the market stabilizes in 2022, comparisons to last year’s bull run will only become more difficult and come just as the government stimulus that helped support the economy fades.

For now, the rush is still ongoing, and it’s not just the fast-paced new IPOs that are getting the extra attention.

After rising 18.7 percent last year, the Dow Jones Industrial Average set a new all-time high on Tuesday, again, trading briefly at 36,734.84 before closing 0.6 percent, or 214.59 points, at 36,799.65.

It was the luxury crowd that led the fashion market higher, including Hermès International, up 74.6% in 2021; Brunello Cucinelli, 69.4 per cent; Parent company of Versace Capri Holdings Ltd., 54.6 per cent; LVMH Moët Hennessy Louis Vuitton, 42.3 per cent; Estée Lauder Cos. Inc., 39.1 percent and Moncler, 28 percent.

There were also winners further down the price scale, including Abercrombie & Fitch Co., up 71.1 percent; Ulta Beauty Inc., 43.6%; Target Corp., 31.1%; American Eagle Outfitters Inc., 26.2%, and Levi Strauss & Co., 24.7%. (Last year’s leader was Macy’s Inc. with a 123.7% run fueled by a push from activist investors to separate the retailer’s e-commerce and brick-and-mortar operations.)

Investors will have a chance to read the tea leaves as companies post their holiday results and tiptoe towards the 2022 projections – some updates are expected next week to coincide with the annual ICR conference.

Jay Sole, an equity analyst at UBS, said companies will return to holiday sales when investors are eager to talk about 2022.

“Our view is that companies will deliver fourth quarter sales and EPS upgrades that are generally better than the market expects,” Sole said in a research note. “However, we doubt this good news will add much sentiment. The reason is that we don’t expect companies to provide outlook for the first quarter or fiscal year 2022, which allays market concerns about tough situations. [comparisons].

“We don’t expect companies to provide many forward-looking comments on sales or costs, and any guidance offered is likely to be conservative due to the uncertainty surrounding COVID-19,” Sole said.

Projecting what’s going to happen for a quarter is hard enough, let alone a year. And all the bets seem to have gone bankrupt with the Omicron wave straining essential services and forcing consumers to squat.

But consultant Hemant Kalbag, chief executive of the consumer retail group at Alvarez & Marsal, said the stage is set for the resurgence of retail to continue with shoppers looking to buy new fashions as Omicron dips ( fingers crossed).

“There will be pent-up demand for people who want to freshen up their wardrobes,” Kalbag said. “It will be good for the fashion industry. People try to go out and dress up. “

And supply chain backups driven by 2021 COVID-19 are expected to decline as the year progresses.

A key issue to be addressed will be prices across the economy.

“There is real inflation,” Kalbag said. “Labor cost inflation, commodity inflation”.

Retailers and brands may try to keep the price line for consumers, accept lower margins and risk irritating investors, or pass prices on to buyers and risk alienating them.

“Rather than price increases, I suspect most retailers and brands will retire [price] promotions, “he said.

But if performance lags, there are clearly investors ready to pounce. Macy’s and Kohl’s Corp. are already facing pressure from activists.

“There will still be pressure on space in the next year,” Kalbag said.

As if fashion needs more pressure.

Take stock of fashion

Many retail stocks enter 2022 with momentum, but also some high expectations, particularly in the world of luxury.

One year change 31/12/2020 31/12/2021) Two-year change 31/12/2019 31/12/2021)
Macy’s Inc. 123.7% 54.0%
Hermès International 74.6% 130.6%
Abercrombie & Fitch Co. 71.1% 101.5%
Brunello Cucinelli SpA 69.4% 87.7%
Capri Holdings Ltd. 54.6% 70.1%
Ulta Beauty Inc. 43.6% 62.9%
LVMH Moët Hennessy Louis Vuitton 42.3% 73.9%
Estée Lauder Cos. Inc. 39.1% 79.2%
Objective Corp. 31.1% 80.5%
Tapestry Inc. 30.6% 50.5%
moncler 28.0% 57.7%
American Eagle Outfitters Inc. 26.2% 72.2%
Levi Strauss & Co. 24.7% 29.8%
Canada Goose Holdings Inc. 23.9% -0.3%
Under Armor Inc. 23.4% -1.9
Kohl’s Corp. 21.4% -3.1%
Dry 18.9% 20.8%
Dow Jones Industrial Average 18.7% 27.3%
Nike Inc. 17.8% 64.5%
Urban Outfitters Inc. 14.7% 5.7%
Ralph Lauren Corp. 14.6% 1.4%
PVH Corp. 13.6% 1.4%
Lululemon Athletica Inc. 12.5% 69.0%
TJX Cos Inc. 11.2% 24.3%
H&M Hennes & Mauritz 4.1% -7.6% Inc. 2.4% 80.5%
Burberry Group plc 1.6% -17.6%
Walmart Inc. 0.4% 21.8%
Gap Inc. -12.6% -0.2%
VF Corp. -14.3% -26.5%
Nordstrom Inc. -27.5% -44.7%
Real Real Inc. -40.6% -38.4%
Farfetch -47.6% 223.0%
Alibaba group -49.0% -44.0%
Stitch Fix Inc. -67.8% -26.3%
Source: S&P Capital IQ

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