This story was originally published here.
Apparel stocks have fallen off a cliff over the past three months. Ever since the novel coronavirus pandemic swept across America, apparel companies have been forced to close their stores, and consumer spending on discretionary items (like clothes) has tanked. In April, consumer spending at clothing stores dropped 90% year-over-year — its biggest drop, ever, by a mile.
But new Placer.ai data shows that a consumer discretionary spending recovery is underway. Specifically, Placer.ai found that foot traffic at apparel stores across America has grown for five straight weeks, with the two most recent weeks in May showing 100%-plus week-over-week growth.
This data isn’t isolated. It’s corroborated by a bunch of other data. The number of Americans that categorized themselves as “extremely worried” about Covid-19 has dropped from 28% in late March, to 23% in late May, according to a Statista survey. Consumer confidence levels have already bottomed. Beaches and restaurants were very crowded Memorial Day weekend. Malls have reported strong early reopening traffic trends.
In other words, there is an overwhelming amount data that support one simple conclusion: the economic recovery, and by extension the consumer spending recovery, is finally here.
As consumer spending trends gradually recover over the next few months, beaten-up apparel stocks will bounce back. By a bunch, since they dropped by a whole lot in March/April. With that in mind, here are seven of the best apparel stocks to buy as consumer spending recovers:
Apparel Stocks to Buy: Urban Outfitters (URBN)
I like Urban Outfitters as one of the top apparel stocks to buy over the next few months for two reasons.
First, this is a best-in-breed apparel retailer. Sales have grown by more than 75% since 2010 — a remarkable and largely unparalleled feat for a mall-based physical apparel retailer. Brand popularity is sky-high, with Piper Jaffray’s Taking Stock with Teens Survey consistently rating Urban Outfitters as one of the most popular shopping destinations for young consumers. And the company has truly embraced the e-commerce revolution, transforming into one of the most formidable omni-channel retailers in the world.
Second, Urban Outfitters targets the 18 to 28 year-old demographic. That demographic is the least at-risk to the coronavirus pandemic. They are also the ones more anxious to get back out into the world and spend money. As such, the first wave of the consumer spending recovery will likely be driven by young consumers. That’s good news for Urban Outfitters.
Bottom line, thanks to its demographic positioning and strong brand, Urban Outfitters is one of the best apparel stocks to buy now.
Editor's Note: Click here for the rest of the apparel stocks.
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