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The Fashion Stocks Gaining Ground in Wall Street’s Record Run

While it is the flashy tech giants that have been propelling Wall Street to new highs, some fashion and retail companies have been getting in on the action, too.

The S&P 500 set a new all-time high of 4,906.69 on Friday and is up 20.5 percent over the past year, recovering from worries of a recession that never came to pass.

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There are still plenty of economic and geopolitical concerns that companies are watching out for — from wars to a likely rematch between Donald Trump and President Joe Biden to the cost of living.

But shoppers are feeling better and that might just be enough for some retailers, for now.

Among the fashion and retail companies closing just below their 52-week highs on Friday were The TJX Cos. Inc. (down 0.1 percent from its peak for the past year); Ross Stores Inc. (0.2 percent); PVH Corp. (0.6 percent); Amazon (1 percent); Dick’s Sporting Goods Inc. (1.4 percent); Williams-Sonoma Inc. (1.9 percent); Abercrombie & Fitch Co. (1.9 percent); Ralph Lauren Corp. (2.7 percent); Walmart Inc. (3.3 percent), and Simon Property Group Inc. (3.4 percent).

All of those companies are being helped along by a suddenly sunnier consumer, who is looking beyond the lingering inflation.

Joanne Hsu, director of the University of Michigan’s Surveys of Consumers, said in her midmonth update that consumer sentiment “soared 13 percent in January,” buttressing a strong reading in December.

“Consumer views were supported by confidence that inflation has turned a corner and strengthening income expectations,” Hsu said. “Over the last two months, sentiment has climbed a cumulative 29 percent, the largest two-month increase since 1991 as a recession ended.…Sentiment has now risen nearly 60 percent above the all-time low measured in June of 2022 and is likely to provide some positive momentum for the economy.”

That doesn’t signal a return to the go-go days necessarily — sentiment is still 7 percent below its historical average since 1978 and pandemic-era savings are still due to run out — but it’s a good start.

Here, a closer look at some of the retailers that are peaking as Wall Street makes its run.

TJX and Ross

Despite the endless aisle of online shopping, consumers still like a little treasure hunt — and deep value — in their lives. Witness the continued gains at leaders TJX and Ross. John Kernan, an analyst at Cowen, said his company’s research showed “significant year-over-year gains in visitation in December” for off-pricers. The trends suggest that fourth-quarter comparable sales forecasts were conservative with TJX setting its goal at a 3 to 4 percent gain and Ross’ outlook calling for just 2 percent, he said.

Kernan said the strength demonstrated “off-price’s structural competitive/merchandising gains relative to other channels through value, trend, fit and branded content.” And that long-standing trend might well continue as the analyst said his research suggests brands are increasing their allocations to off-price.

Amazon

Amazon is big, yes. Wells Fargo estimates that its apparel and footwear business draws $67 billion in annual U.S. sales, including third-party goods, making it the largest player on the fashion playground. But it’s also good at using its scale and breadth to keep expanding on its strengths.

Brian Nowak, an analyst at Morgan Stanley, estimated that the company’s Prime Video ads, set to launch Monday, will drive an additional $5.2 billion in sales in 2025. Likewise, Novak predicted the company’s North American retail margins would improve — to minus 1 percent in 2025 — with more efficient fulfillment and shipping, including an increase in higher-margin same-day shipments and the use of more robotics.

Even when it’s not making money, Amazon manages to become more of a force in retail.

PVH and Ralph Lauren

Ralph Lauren and the Tommy Hilfiger and Calvin Klein parent PVH might be legacy fashion companies, but that doesn’t mean the Seventh Avenue darlings haven’t learned some new tricks.

In a study of “brand heat” on social media, Wells Fargo analyst Ike Boruchow called out both companies for strong showings. While PVH’s two brands saw moderate declines midyear, they “saw an inflection in brand heat trends” in the fourth quarter. Tommy was the standout, picking up momentum in December with its brand heat up 34 percent from a year earlier.

But it was Ralph Lauren that saw the strongest brand heat growth in the fourth quarter, rising 58 percent. “The brand’s social media presence has consistently improved since August, which is particularly impressive given they are lapping high-double digit gains in 2022, a positive signal for upcoming earnings,” Boruchow said.

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