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About the Industry
The Retail - Apparel & Shoes industry encompasses the manufacturing, distribution, and retailing of clothing, footwear and accessories. Various factors, including fashion trends, consumer spending habits, economic dynamics and seasonal variations, influence the industry. Companies within the industry range from global apparel giants to domestic brands, each targeting specific market segments. The industry presents both opportunities and challenges. On one hand, it demands continuous product innovation, brand distinctiveness and effective marketing to attract customers. On the other hand, fierce competition and price sensitivity pose hurdles. Technological advancements and the rise of online retail have revolutionized the industry, with consumers increasingly seeking convenience and personalized shopping experiences.
4 Key Trends to Watch in the Industry
Consumers’ Willingness to Spend: The Retail – Apparel & Shoes industry remains highly sensitive to consumers’ purchasing power. U.S. retail sales rose a solid 0.6% month over month in November, according to the U.S. Department of Commerce, signaling continued resilience in consumer spending. Within that, sales at clothing and clothing accessories stores increased 0.9% sequentially and 7.5% year over year. Adding further support, the Federal Reserve’s recent rate cuts have eased borrowing costs, improving financial flexibility for households and encouraging discretionary spending, an important tailwind for the sector.
Brand Strength & Capital Discipline Fuel Growth: Industry players are sharpening their focus on strengthening consumer engagement through product innovation, more personalized shopping experiences, and expanded digital and data analytics capabilities. Fresh assortments, customization offerings and updated store formats are helping draw shoppers in and build loyalty. At the same time, companies are reinforcing brand portfolios through targeted marketing, strategic acquisitions, partnerships and ongoing innovation to support growth. On the operational side, many are emphasizing financial discipline, tightening inventory management, rationalizing store footprints by exiting underperforming locations, prioritizing high-return capital spending and driving efficiency gains across the business.
Diversification & Digitization Drive Expansion: As shopping preferences continue to shift, retailers are integrating in-store and online operations through omnichannel capabilities. Investments in loyalty programs, accelerated fulfillment options (curbside pickup, doorstep delivery and BOPIS), store remodels, smoother checkout experiences and mobile point-of-sale solutions are helping brands remain competitive. Retailers are also positioning stores as fulfillment hubs, supporting ship-from-store, pickup and returns, to speed delivery and improve inventory productivity. Aligning with digital trends, companies are replenishing shelves with popular merchandise while stepping up investments in technology, including AI-led personalization and advanced merchandising tools to better serve the growing base of online and hybrid shoppers.
Pressure on Margins to Linger: Competition remains intense, with retailers battling for market share through pricing, product assortment and speed to market. While investments in digital infrastructure, delivery capabilities and marketing support sales growth, they also add high costs. Increased spending on store operations and advertising continues to weigh on margins. Companies are actively mitigating these pressures by streamlining operations, optimizing supply chains, and implementing strategic pricing strategies to balance growth and profitability.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Retail - Apparel And Shoes industry is a group within the broader Zacks Retail – Wholesale sector. The industry currently carries a Zacks Industry Rank #46, which places it in the top 19% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates encouraging near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. The industry’s position in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate.
Looking at the aggregate earnings estimate revisions, it appears that analysts are gaining confidence in this group’s earnings growth potential. Over the past year, the industry’s earnings estimate has risen 9.6%.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry vs. Broader Market
The Zacks Retail - Apparel And Shoes industry has underperformed both the broader Zacks Retail-Wholesale sector and the Zacks S&P 500 composite over the past year.
The industry has declined 6.7% over this period compared to the S&P 500’s growth of 16.5%. Meanwhile, the broader sector has risen 7.2%.
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Industry's Current Valuation
Based on the forward 12-month price-to-earnings (P/E), which is commonly used for valuing retail stocks, the industry is currently trading at 16.11X compared with the S&P 500’s 23.28X and the sector’s 25.71X.
Over the last five years, the industry has traded as high as 24.64X and as low as 10.42X, with the median being at 16.71X, as the chart below shows.
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4 Stocks Worth Considering
American Eagle: American Eagle is demonstrating a powerful turnaround, driven by the exceptional performance of its Aerie and OFFLINE brands, which continue to capture significant market share. The company's strategic pivot toward high-impact marketing campaigns and high-profile collaborations has successfully revitalized brand desirability, leading to accelerated traffic and strong customer acquisition across all digital and physical channels. Operational resilience is evident through a disciplined focus on inventory management, cost efficiencies and a modernized store remodeling program that elevates the overall shopping experience. By leveraging its dominance in core categories like denim while aggressively expanding into lifestyle segments such as activewear and sleep, the company is effectively broadening its reach across diverse consumer cohorts.
The Zacks Consensus Estimate for American Eagle’s current financial-year sales suggests growth of 2.7% from the year-ago period. This leading global specialty retailer of apparel and accessories has an average trailing four-quarter earnings surprise of 35.1%. Shares of this Zacks Rank #1 (Strong Buy) company have advanced 48.5% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
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Boot Barn Holdings: Boot Barn continues to demonstrate broad-based growth across all major merchandise categories and geographies. The company is successfully executing its "stores-first" strategy, supported by a newly expanded total addressable market and a significantly higher long-term store count potential that underscores its dominance in the Western and work-wear lifestyle sectors. Strategic initiatives in omnichannel retail, including the launch of dedicated exclusive brand websites and the integration of artificial intelligence, are driving robust digital sales and attracting a new customer demographic. Furthermore, the company’s ability to expand merchandise margins through higher exclusive brand penetration and effective cost mitigation strategies highlights its resilient business model and pricing power.
This leading lifestyle retailer of western and work-related footwear, apparel and accessories has an average trailing four-quarter earnings surprise of 5.4%. The Zacks Consensus Estimate for Boot Barn’s current financial-year sales and EPS suggests growth of 16.9% and 25.1%, respectively, from the year-ago period. Shares of this Zacks Rank #1 company have risen 19.4% in the past year.
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Victoria's Secret: Victoria's Secret is demonstrating a powerful brand resurgence by successfully executing its "Path to Potential" strategy, which has revitalized its core intimate business. The company’s focus on product innovation across its Victoria's Secret, PINK, and Beauty brands is driving significant customer acquisition and market share gains, even within a challenging retail environment. Operationally, the business is scaling effectively by leveraging a disciplined promotional strategy and a solid operational foundation to deliver robust margin expansion and increased profitability. Strategic investments in digital-first marketing and enhanced store experiences, such as the "Store of the Future" concept, further solidify its leadership position in the global intimates and beauty markets.
This specialty retailer of women's intimate and other apparel and beauty products has a trailing four-quarter earnings surprise of 55.5%, on average. The Zacks Consensus Estimate for Victoria's Secret’s current financial-year sales suggests growth of 4.7% from the year-ago period. Shares of this Zacks Rank #1 company have surged 61.1% in the past year.
Gap: Gap is showcasing a powerful operational turnaround boosted by the successful execution of its brand reinvigoration playbook. The company is leveraging high-impact marketing and culturally relevant strategic partnerships, such as the viral "Better in Denim" campaign and designer collaborations, to attract younger demographics while maintaining core customer loyalty. Operational strengths, including a modernized supply chain integrated with AI and automation, are driving significant productivity gains and providing the agility needed to mitigate external headwinds. With a sharpened focus on "must-win" categories like denim, active, and kids and baby, alongside a thoughtful expansion into the beauty sector, the company is effectively broadening its market reach and revenue potential.
This largest specialty apparel company in the United States has an average trailing four-quarter earnings surprise of 19.1%. The Zacks Consensus Estimate for Gap’s current financial-year sales suggests growth of 1.9% from the year-ago period. Shares of this Zacks Rank #2 (Buy) company have gained 6.3% in the past year.
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This article originally published on Zacks Investment Research (zacks.com).
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