New Trend in Retail: Who Benefits the Most?
Lew Frankfort, the chairman and CEO of Coach (NYS: COH) , recently noted shoppers are purchasing more accessories and less clothing. Pushing the mental image of a Las Vegas pool party aside, that simply means accessories are now receiving a higher percentage of total dollars spent in the apparel industry than they had in the past. One study confirms Mr. Frankfort's comments and shows that accessories sales have been growing 9% a year for the past five years.
Below are a few companies in the apparel and accessories industry and how their revenues have recently been affected.
Market Cap (in billions)
Revenue for Past 6 Months (in millions)
Revenue Increase Over Same Time Frame 2010
|Michael Kors (NYS: KORS)||$5.97||$520,207||61%|
|Tiffany (NYS: TIF)||$8.12||$1,694,479||25%|
|lululemon athletica (NAS: LULU)||$9.15||$442,539||34%|
|Under Armour (NYS: UA)||$4.05||$756,859||41%|
Source: Yahoo! Finance.
Best of both worlds
While Coach has positioned itself at the lower price point of the accessories market, and Tiffany is more on the higher end, Michael Kors has conveniently situated itself in both. Kors has branded a high-end collection, with items ranging from $500 to $6,000, and a lower-end collection with merchandise is priced from $45 to $800.
Even though Coach and Tiffany are growing nicely, both are limited to specific demographics based on price and quality. Kors, on the other hand, will continue growing faster than the competition because of its wider target market.
Although Nike still holds the gold medal for athletic apparel, Lululemon and Under Armour are quickly becoming realistic contenders. While Lulu doesn't break out the apparel vs. accessories sales number, the company's growth over the past few years has been great and fueled by company owned and operated stores. Out of the 137 Lulu stores, it controls 133 of them, which allows it to realize better margins than competitors.
Perhaps seeing the success of Lululemon's in-house model spurred Under Armour to bring hats and bags under the company's control in January, 2011. Though UA saw a decrease in licensee revenue of $7.8 million, it realized a $66.5 million increase in the accessories department. In the last quarter alone, UA's accessories division had revenue increase by 211% over the same time frame in 2010. If the year over year numbers continue to be strong in 2012, investors should hold on tight for a steep ride up.
Based off the revenue growth shown above, I don't feel that you could go wrong with any of these five companies in your portfolio, but I am more bullish on Mickael Kors and Under Armour than the other three. For another great retailer, take a look at this report about one company that is changing the face of the industry! It's totally free -- click here.
At the time this article was published At the time this article was written, Fool contributor Matt Thalman owned share of Michael Kors and Lululemon, but no other companies mentioned above. The Motley Fool owns shares of Under Armour, Lululemon Athletica, and Coach. Motley Fool newsletter services have recommended buying shares of Coach, Lululemon Athletica, and Under Armour. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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