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Long Term Growth Shopping Lists Should include Apparel Stocks with Big Stories (NKE, FBCD, SKX, LULU, SFIX, FTCH, TJX, TGT)

The bear is growling angry right now on Wall Street, but that’s when savvy investors should be busy making shopping lists to pick up exposure to long-term…

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The bear is growling angry right now on Wall Street, but that’s when savvy investors should be busy making shopping lists to pick up exposure to long-term growth opportunities currently on sale.

Every time this happens – the blood flows on the Street – most market participants make the mistake of getting swept up in crowd psychology, rather than coldly and rationally scanning for deep discounts on high quality names with strong growth prospects.

The market doesn’t go up forever. But it always comes back from dips eventually. When we see big swings to the downside, and fear rules the tape, that’s the only time you are ever going to have the chance to pick up exposure to interesting stocks without paying a premium.

One area that could be increasingly interesting right now is the trendy apparel space.

Sales of apparel took a hit during the pandemic, but that could ultimately be a story of pent-up demand as we move into the future. During the pandemic, people engaged in far fewer social activities and spent more time at home. Now, as the world reopens, it’s time to play catch-up in terms of consumer demand. That could bode extremely well for apparel names in the quarters ahead (1).

The revenue of the global apparel market was calculated at USD$1.5 trillion in 2021 and was predicted to increase to approximately USD$2 trillion by 2026. The United States and China account for most of this apparel demand (2).

With that in mind, we take a look at some of the most interesting stories in the apparel space below.

 

Skechers USA Inc. (NYSE:SKX) engages in designing, development, and marketing of lifestyle footwear for men, women, and children of all ages. It operates through its Domestic Wholesale, International Wholesale, and Direct-to-Consumer segments.

The Domestic Wholesale segment distributes footwear through the local wholesale distribution channels including department stores, specialty stores, athletic specialty shoe stores and independent retailers, as well as catalog and internet retailers. The International Wholesale segment includes international direct subsidiary and international distributor sales. The Direct-to-Consumer segment refers to e-commerce which operates through the concept stores, factory outlet stores, and warehouse outlet stores.

Skechers USA Inc. (NYSE:SKX) recently announced financial results for the first quarter ended March 31, 2022, including record quarterly sales of $1.82 billion, a year-over-year increase of 26.8%, wholesale sales growth of 32.7%, direct-to-consumer sales growth of 15.7%, and diluted earnings per share of $0.77, a year-over-year increase of 22.2%. The company also noted that it repurchased $25 million of common stock (3).

“First quarter sales of over $1.8 billion are a new quarterly sales record for Skechers, and reflect our broad-based global appeal and our team’s focus on successfully navigating supply chain constraints,” began David Weinberg, Chief Operating Officer of Skechers. “The sales achievement was driven by increases of 33% in our Wholesale and 16% in our Direct-to-Consumer segments. By region, the growth was the result of increases of 31% in the Americas, driven by double-digit growth in the United States; 49% in EMEA, driven by strong growth across Europe; and 4% in APAC, led by 9% growth in China. Several key APAC markets faced increasing COVID-related restrictions as the quarter evolved including China. Despite the on-going pandemic and other macroeconomic headwinds, we are especially encouraged by the phenomenal growth we experienced. We believe this momentum will continue as we strive towards our goal of $10 billion by 2026.”

While this is a clear factor, it has been incorporated into a trading tape characterized by a pretty dominant offer, which hasn’t been the type of action SKX shareholders really want to see. In total, over the past five days, shares of the stock have dropped by roughly -12% on above average trading volume. All in all, not a particularly friendly tape, but one that may ultimately present some new opportunities. Over the past month, shares of the stock have suffered from clear selling pressure, dropping by roughly -6%.

Skechers USA Inc. (NYSE:SKX) managed to rope in revenues totaling $1.8B in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 27.4%, as compared to year-ago data in comparable terms. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($694.8M against $1.4B, respectively) (4).

 

FBC Holding Inc. (OTC US:FBCD) is a small but up-and-coming brand in the apparel space dedicated to individual identity and expression.

The company’s primary brand is “Formrunner” (https://formrunnerapparel.com/) (5).

FBC Holding Inc. (OTC US:FBCD) most recently announced that the company is looking to establish a Brand Ambassador as a potential outlet to expand the apparel line to get a better name around the world. According to its release, the company has been working diligently to enter the Entertainment/Music Industry through multiple connections and relationships to big Hip-Hop & Rap Artists.

This could potentially be a major catalyst if and when it hits, which is why we include it here despite the stock’s small market cap and lack of current fanfare.

As noted by the company, the apparel market encompasses every kind of clothing, from sportswear to business wear, from value clothing to statement luxury pieces. After difficulties in 2020 during the coronavirus pandemic, when sales across the apparel industry took a hit, the global demand for clothing and shoes is set to rise again.

FBC Holding Inc. (OTC US:FBCD) CEO and President, Lisa Nelson, stated, “By having a Brand Ambassador to represent our clothing line, this will make Formrunner Apparel reach its true potential along with explosive revenue and exposure… In 2022, Brand Ambassadors are the most impactful way to boost a brand. Brand ambassadors supply the human aspect to marketing campaigns. The more people get to know a brand, the more likely they are to buy. They can also help to build up positive online reviews and comments which affects the way potential customers view products.” (6)

 

Stitch Fix Inc. (Nasdaq:SFIX) bills itself as the world’s leading online personalized shopping experience. Founded in 2011, the company is building a “transformative and inclusive ecommerce model, an ecosystem of shopping experiences based on convenience and guided discovery that makes it radically simple and delightful for customers to discover and buy what they love.”

According to its communications, SFIX represents an interesting online personal styling service that delivers personalized fixes of apparel and accessories to men, women, and kids.

Stitch Fix Inc. (Nasdaq:SFIX) recently announced that it is joining forces with Emmy Award winning actor and producer Keegan-Michael Key for its new “Stitch Fix It” campaign. According to the release, fresh insights from a Stitch Fix-commissioned survey found that men hold onto old clothes for a number of reasons, with almost half (46%) citing sentimental value and lack of time as hurdles to a closet refresh. Informed by these results, Stitch Fix teamed up with Keegan-Michael Key, who admits he is among the 28% of men that regularly wear items more than a decade old. To kick off Key’s first-ever retail partnership, Stitch Fix is debuting an exclusive music video performed by Key, infused with the actor’s signature wit, encouraging men to join him in breaking up with their outdated wardrobe.

“I’ll admit, I’m guilty of hanging onto clothes for too long and at times need a nudge to keep me from falling into a style rut,” says Keegan-Michael Key. “For the 40% of men who say tossing their overworn clothing is worse than a break-up, Stitch Fix is the wardrobe wingman ready to arm you with personalized style recommendations and provide a time-saving solution for that wardrobe refresh.” (7)

SFIX shares have been murdered over the past year, but could represent a deep value opportunity given the company’s recent catalysts. The stock’s RSI reading is now near 30, which is an RSI score that often signals oversold conditions.

Stitch Fix Inc. (Nasdaq:SFIX) has a significant war chest ($266.9M) of cash on the books, which must be weighed relative to about $276.6M in total current liabilities. SFIX is pulling in trailing 12-month revenues of $2.2B. In addition, the company is seeing minor top-line growth, with y/y quarterly revenues growing at 2.5%. (8)

Other core names in the apparel space include Nike Inc. (NYSE:NKE), lululemon athletica inc. (Nasdaq:LULU), Farfetch Ltd. (NYSE:FTCH), TJX Cos. (NYSE:TJX), and Target Corp. (NYSE:TGT). (9)

References:

  1. https://www.ipsos.com/en-us/news-polls/axios-ipsos-coronavirus-index
  2. https://www.statista.com/outlook/cmo/apparel/worldwide#:~:text=The%20revenue%20of%20the%20global,2%20trillion%20dollars%20by%202026.
  3. https://finance.yahoo.com/news/skechers-announces-record-first-quarter-200500993.html
  4. https://www.marketwatch.com/investing/stock/skx?mod=quote_search
  5. https://formrunnerapparel.com/
  6. https://www.otcmarkets.com/stock/FBCD/news/FBC-Holding-Inc-FBCD-Looking-to-Secure-a-Brand-Ambassador-to-Represent-Formrunner-Apparel?id=356447
  7. https://finance.yahoo.com/news/stitch-fix-keegan-michael-key-134000245.html
  8. https://www.marketwatch.com/investing/stock/sfix?mod=quote_search

9. https://www.fool.com/investing/stock-market/market-sectors/consumer-discretionary/apparel-stocks/

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The post Long Term Growth Shopping Lists Should include Apparel Stocks with Big Stories (NKE, FBCD, SKX, LULU, SFIX, FTCH, TJX, TGT) appeared first on Wall Street PR.

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Economics

Morgan Stanley: SPX could return to its pre-pandemic 3,400 level

The S&P 500 index could return to its pre-pandemic 3,400 level in the coming months that translates to another 15% downside from here, warned a Morgan…

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The S&P 500 index could return to its pre-pandemic 3,400 level in the coming months that translates to another 15% downside from here, warned a Morgan Stanley analyst on Monday.

Don’t be fooled by the bear market rally

Michael Wilson dubs the recent bounce (about 4.0%) in U.S. equities a “bear market rally” and says investors should brace for more pain ahead as inflation and supply constraints remain a significant headwind. In his note, the analyst said:

With valuations now more attractive, equity markets so oversold an rates potentially stabilizing below 3.0%, stocks appear to have begun another material bear market rally. After that, we remain confident that lower prices are still ahead.

Last week, the U.S. Bureau of Labour Statistics said inflation stood at 8.30% in April – a marginal decline versus the prior month but still ahead of the Dow Jones estimate.

How to navigate the current environment?

Wilson continues to see a recession as unlikely, but agrees that the risk of such an economic downturn has certainly gone up. The U.S. economy unexpectedly shrank 1.40% in the first quarter of 2022.

That is just another reason why equity risk premium is too low, and stocks are still overpriced. The bear market won’t be over until valuations fall to levels (14 – 15x) that discount the kind of earnings cuts we envision, or earnings estimates get cut.

He recommends increasing exposure to real estate, health care, and utilities stocks to navigate the current environment, while tech and consumer discretionary stocks remain a big “no” for him.

The post Morgan Stanley: SPX could return to its pre-pandemic 3,400 level appeared first on Invezz.

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Economics

What Is Quantitative Tightening? How Does It Work?

What Is Quantitative Tightening?The main job of a central bank, like the Federal Reserve, is to keep the economy strong through maximum employment and…

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Quantitative tightening is not the opposite of quantitative easing—they are distinctly different activities.

Ballun from Getty Images Signature; Canva

What Is Quantitative Tightening?

The main job of a central bank, like the Federal Reserve, is to keep the economy strong through maximum employment and stable prices. It does this by managing the Fed Funds Rate, which it sets at its Federal Open Market Committee meetings. This effectively raises or lowers the interest rates that banks offer companies and consumers for things like mortgages, student loans, and credit cards.

But when the economy needs help and interest rates are already low, the Fed must turn to other tools in its arsenal. This includes practices like quantitative easing and quantitative tightening; the former expands the shares of Treasury bonds, mortgage-backed securities, and even stocks on the government’s balance sheets, while the latter tightens the monetary supply. Both have a profound effect on liquidity in the financial markets.

The Fed came to the rescue with trillions of dollar’s worth of quantitative easing at the end of the 2007–2008 Financial Crisis, and again during the global Coronavirus pandemic.

But the Fed can’t go on printing money forever. Whenever it employs quantitative easing, the Fed must eventually turn to its counterpart, which is known as quantitative tightening, in order to limit some of the negative outcomes of the former, such as inflation.

How Does Quantitative Tightening Work? What Is an Example of Quantitative Tightening?

Through quantitative tightening, the Federal Reserve reduces its supply of monetary reserves in order to tighten its balance sheet—and it does so simply by letting the bonds and other securities it has purchased reach maturity. When this happens, the Treasury department removes them from its cash balances, and thus the money it has “created” effectively disappears.

Does the Fed know exactly when to ease the gas pedal on quantitative easing? According to the Fed, timing is everything. Remember how the Fed’s main job is to create a strong economy through stable prices and high employment? As it carefully monitors the effects interest rates are having on the economy, it also keeps a close eye on the overall measure of inflation. It’s both a constant battle and a juggle. 

Take the period following the Financial Crisis as an example. The 2007–2008 crisis stemmed in large part from the implosion of collateralized debt obligations, and so the Fed kept the Fed Funds Rate at virtually 0% for almost a decade in order to spur growth and maintain stable rates of employment.

During this period, it also undertook a series of quantitative easing measures, watching its balance sheet balloon from $870 billion in August 2007 to $4.5 trillion in September 2017.

The FRED graph below illustrates how the Fed Funds rate, in blue, remained at nearly zero for the period while the total size of the Fed’s balance sheet, in red, grew. The shaded areas indicate recession.

Federal Reserve Bank of New York, Effective Federal Funds Rate [EFFR], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/EFFR, May 16, 2022.

The Fed believed that as soon as employment became stable, it needed to turn its attention to meeting its 2% inflation target, which it accomplished by raising interest rates. And so, in October 2015, it began gradually increasing the Fed Funds Rate in 25 basis point increments. Over the next several years, rates went up from 0.0%–0.25% levels to 2.25%–2.5% in 2018. This course of action, in the Fed’s words, was known as liftoff.

After raising rates a few times with no disastrous consequences, in 2017 the Fed next embarked on an effort to reduce its balance sheet through quantitative tightening. This was also known as unwinding its balance sheet, because it was taking action in a slow and gradual way.

Between 2017 and 2019, the Fed let about $6 billion of Treasury securities mature and $4 billion of mortgage-backed securities “run off” per month, increasing that amount every quarter until it hit a maximum of $30 billion Treasuries and $20 billion mortgage-backed securities per month. By July 2019, the Fed announced that its unwinding was complete.

The Fed published a blog post detailing these efforts, categorizing them as its “balance sheet normalization program,” since it sought to “return the policy rate to more neutral levels.”

What Effect Does Quantitative Tightening Have on the Economy?

While the goal of quantitative easing is to spur growth, quantitative tightening doesn’t hinder it; in fact, many Governors of the Federal Reserve believe quantitative tightening doesn’t have much effect on the economy at all.

“Quantitative tightening does not have equal and opposite effects from quantitative easing,” said St. Louis Fed President Jim Bullard, “Indeed, one may view the effects of unwinding the balance sheet as relatively minor.”

Former Fed Chair Janet Yellen famously described quantitative tightening as “something that will just run quietly in the background over a number of years,” and that “it’ll be like watching paint dry.”

St. Louis Fed Research Director Chris Waller compared quantitative tightening with “slowly opening the stopper in a drain and letting the water run out,” and by doing so, they were “letting the supply of U.S. Treasuries in the hands of the private sector grow.”

But critics have argued that the excess reserves the Fed creates by “printing money” through quantitative easing have negative consequences on the overall economy. For example, these reserves can lead to currency devaluation and higher inflation, which is defined as when prices rise faster than wages. Inflation can have disastrous effects on an economy, resulting in asset bubbles and even recessions.

Even the Fed admitted as much when St. Louis Vice President Chris Neely noted that between 2008–13, the Fed’s asset purchases led to a decrease in 10-Year Treasury yields by 100–200 basis points. He said, “this reduction modestly raised prices and real activity.”

Just remember that the Fed’s principal aims are to generate stable prices and high employment. So while the Fed hasn’t explicitly said so, reducing its balance sheet might be one of its methods to combat inflation.

Why Is Quantitative Tightening on the Fed’s Agenda Again?

In 2022, inflation reached decades’ high, stemming from a number of factors, including fallout from the global Coronavirus pandemic, which increased labor prices, and Russia’s invasion of Ukraine, which affected energy and commodities. In March, 2020, the Fed slashed the Fed Funds rate to 0.00%–0.25% in response to the pandemic. In May, 2022 it raised rates again by 0.5%.

What Is the Schedule for Quantitative Tightening?

On May 4, 2022, the Fed announced it would be undertaking a “phased approach” of quantitative tightening measures beginning with a 3-month period of unwinding $30 billion of Treasuries and $17.5 billion mortgage-backed securities beginning on June 1, 2022. By September, 2022 these caps would increase to $60 billion and $35 billion, respectively.

Is Quantitative Tightening Really So Frightening?

TheStreet’s Ellen Chang says that, according to economists, inflation is on a downward trend, most likely to decline to 3% by the end of the year, and that higher interest rates as well as quantitative tightening should do what they’re supposed to, and reduce pricing pressure. 

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Economics

Recession-Proof Stocks To Buy Now? 4 Retail Stocks To Know

These retail stocks could be in focus ahead of April’s retail sales data.
The post Recession-Proof Stocks To Buy Now? 4 Retail Stocks To Know appeared…

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Do You Have These Top Retail Stocks On Your Radar This Week?

As we begin another week of trading in the stock market, retail stocks appear to be in focus. Investors can expect plenty of action from the sector as Walmart, Lowe’s (NYSE: LOW), and many other consumer juggernauts are expected to report their earnings. In fact, Dillard’s (NYSE: DDS) has already set the tone last week after announcing favorable first-quarter financials. The company reported a comparable retail sales growth of 23% year-over-year and a record high retail gross margin of 47.3%. Aside from that, April’s retail sales report is also scheduled to be released on Tuesday. Hence, it would not be surprising that investors are paying close attention to the retail sector this week.

Now that the world is returning to normalcy, many would expect retailers to see a strong rebound from their pandemic struggles. For instance, Seattle-based Nordstrom (NYSE: JWN) recently announced plans to open a new Nordstrom Rack in the spring of next year. The new store will be a mixed-use complex in the North Hollywood neighborhood of Los Angeles, California. It will be part of the heart of the area that features other top retailers such as LA Fitness, Regal Cinemas, Ulta Beauty (NASDAQ: ULTA), and others. With all said and done, retail companies will likely stay relevant if they can keep up with the times. So, here are some of the top retail stocks in the stock market today worth checking out. 

Retail Stocks To Watch This Week

Walmart

Walmart is among the top retail names in the stock market. Put simply, the company offers shopping opportunities in both retail stores and through e-commerce and provides access to its other service offerings. Moreover, the company often promotes its services at everyday low prices to attract the interest of consumers. Elsewhere, its International segment includes various formats that include supercenters, supermarkets, hypermarkets, and e-commerce entities. Now, all eyes are on WMT stock ahead of its first-quarter earnings report on Tuesday, May 17. 

Furthermore, the company has also been actively promoting its Walmart+ membership program. Late in April, Walmart announced that Walmart+ members will be eligible for lower fuel costs with a bigger discount per gallon at the pump at more than 14,000 fuel stations nationwide. With the addition of 12,000 Exxon and Mobil locations across the U.S., its members will save 10 cents per gallon at participating Exxon and Mobil locations. Also, Murphy and Walmart U.S. stations will offer a reduction of 5 to 10 cents per gallon. Considering these, would you be investing in WMT stock ahead of its earnings report?

WMT STOCK
Source: TD Ameritrade TOS

[Read More] Best Social Media Stocks To Buy Now? 4 To Watch This Week

Lululemon

Another top retail company to note right now is Lululemon. For those unaware, the company is a designer, distributor, and retailer of lifestyle-inspired athletic apparel and accessories. On a sense of scale, the company has approximately 575 stores in 17 countries around the globe. Most of its retail stores are either located in on-street locations, lifestyle centers, or within shopping malls. With that being said, Lululemon has been making several positive strides in the right direction over the past month. For starters, the company announced the nationwide expansion of lululemon Like New in April. 

This marks the brand’s first trade-in and resale program that is now available to all guests across the U.S. The company plans to reinvest all of its profits to support the company’s commitment to making 100 percent of its products with sustainable materials and end-of-use solutions by 2030. On top of that, Lululemon also announced that it plans to double its 2021 revenue of $6.25 billion to $12.5 billion within the next five years. It believes that significant growth can be expected across key pillars such as product innovation, guest experience, and market expansion. For example, the company’s Power of Three x2 growth strategy plans to double men’s and digital revenues and quadruple international revenues relative to 2021. Given these plans, should investors be keeping a closer tab on LULU stock now?

LULU stock chart
Source: TD Ameritrade TOS

Home Depot

Following that, let us have a look at the home improvement retailer, Home Depot. In detail, the company offers an assortment of building materials, lawn and garden products, decor products, home improvement products, and many more. Besides that, the company also provides several services such as home installation services, and tool and equipment rental. With approximately 2,300 stores throughout the U.S. and other parts of the world, the company is no stranger to most consumers. However, HD stock has been trading sideways over the past month. Investors are likely hoping that a strong earnings report on Tuesday may change the sentiment for the stock. 

Earlier this month, Home Depot announced a partnership with Bonnie Plants and AmpleHarvest.org. For the uninitiated, Bonnie Plants is the largest grower of vegetables and herb plants for home gardens in the U.S. The collaboration aims to empower gardeners to grow and donate to local food pantries. So, gardeners can ensure they will have an abundance of amazing harvest by expanding their garden with the Bonnie Plants Harvest Select line that is available exclusively at Home Depot. It is also noteworthy that UBS recently set a price target of $360 on HD stock, representing an upside of about 20%. All things considered, would HD stock be worth watching right now?

HD stock
Source: TD Ameritrade TOS

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Foot Locker

Lastly, we have the shoes and apparel retailer to sum up the list, Foot Locker. In brief, the company uses its omnichannel capabilities to bridge the digital world and physical stores. As such, it provides buy online and pickup-in-store services, order-in-store, as well as the growing trend of e-commerce. Well, some of its most notable brands include Eastbay, Footaction, Foot Locker, Champs Sports, and Sidestep.

Not long ago, the company and one of the leading sports brands in the world, Adidas, announced a new and enhanced partnership. This new collaboration will be built around product innovation, deeper consumer connectivity, and overall better experiences. Moving forward, Foot Locker will be the lead partner for Adidas in the basketball category. Additionally, the partnership will target over $2 billion in retail sales over the next three years. Given such exciting developments, do you think FL stock could see brighter days ahead soon?

FL stock chart
Source: TD Ameritrade TOS

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The post Recession-Proof Stocks To Buy Now? 4 Retail Stocks To Know appeared first on Stock Market News, Quotes, Charts and Financial Information | StockMarket.com.

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