4 Stocks to Buy as Wide-Legged Jeans Gain Popularity With the gradual demise of skinny jeans, there has been a resurgence in the popularity of loose-fitting and wide-legged jeans as consumers look for mo...

With the gradual demise of skinny jeans, there has been a resurgence in the popularity of loose-fitting and wide-legged jeans as consumers look for more comfortable and relaxing styles. This shift in fashion preference should bolster the growth of leading players in this space—Levi Strauss (LEVI), The Gap (GPS), Abercrombie & Fitch (ANF), and Guess? (GES). So read on for a closer examination of these stocks' prospects.

Although the denim industry suffered a decline in sales amid the pandemic as consumers limited their discretionary spending, shifting fashion preferences to more relaxed styles and increasing spending on apparel as people update their wardrobes to resume day-to-day outdoor activities have fueled the industry's recovery. Jeans lovers are shifting their preference to wide-legged jeans due to their versatility and all-purpose comfort features. According to retail specialist Stephanie Wissink's analysis, google searches for low-rise jeans with wide-legged and flare jeans have surged 91% over the past six months.

With consumers returning to looser and more comfortable styles and denim brands, the demand for wide-legged jeans should increase. The global market for denim jeans is expected to reach $83.2 billion by 2026, registering a 4.7% CAGR. This trend should give the jeans industry a much-needed boost.

Hence, we think it could be wise to bet on popular denim stocks Levi Strauss & Co. (LEVI), The Gap, Inc. (GPS), Abercrombie & Fitch Co. (ANF), and Guess?, Inc. (GES). We expect these companies to generate substantial sales growth in the coming months.

Levi Strauss & Co. (LEVI)

LEVI is one of the largest apparel companies and a global leader in jeans wear. The San Francisco company designs and markets casual wear, jeans, and other related accessories for men, women, and kids. LEVI offers its products under Levi's, Dockers, Signature by Levi Strauss & Co., and Denizen brands. The company operates in 3,100 brand stores and shops-in-shops.

Last month, LEVI acquired the Beyond Yoga brand to enter the activewear category. Chief financial officer Harmit Singh said, "The brand has more than doubled its revenue and grown profitability in a disciplined manner over the last three years. This acquisition further strengthens LS&Co.'s revenue trajectory, enhances our gross and EBIT margins and is immediately accretive to our earnings. Given our strong liquidity position, this transaction, which is consistent with our capital allocation strategy, allows us to profitably scale a high-return, digital business."

LEVI's net income for the second quarter, ended May 30, 2021, increased 156.5% year-over-year to $1.28 billion. The company's gross profit increased 342.2% from its year-ago value to $750.2 million. Its operating income came in at $106.46 million, versus a $448.24 million operating loss in the prior-year quarter. Also, the company's net income came in at $64.72 million, compared to a $363.55 million net loss in the prior-year period.

Analysts expect LEVI's revenue to increase 29.1% year-over-year to $5.75 billion in its fiscal year 2021. Also, the company has an impressive earnings surprising history; it beat the consensus EPS estimates in each of the trailing four quarters. Its EPS is expected to increase 538.1% in the current year. Moreover, the stock has gained 30.9% in price over the past nine months and 106.6% over the past year.

LEVI's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

Also, the stock has an A grade for Sentiment, and a B grade for Quality and Momentum. We've also graded LEVI for Growth, Value, and Stability. Click here to access all LEVI's ratings. LEVI is ranked #11 in the Consumer Goods industry.

The Gap, Inc. (GPS)

American clothing and accessories retailer GAP operates in six divisions: Gap; Old Navy; Hill City; Banana Republic; Intermix; and Athleta Gap Inc. The San Francisco company offers apparel, accessories such as denim, tees, eyewear, shoes, jewelry, handbags, and other personal care products.

Last month, Athleta, one of the brands under GAP, launched its e-commerce site in Canada. The site's launch should help consumers in Canada to avail themselves of all Athleta's exclusive products online. Furthermore, Athleta plans to double its net sales by 2023, which will boost the company's overall revenue.

Also last month, GAP acquired the e-commerce startup Drapr, which allows the customers to create 3D avatars and try on clothes virtually. Through this acquisition, GAP customers will have access to a personalized and inclusive fit experience and a recommendation about their best fit based on their individual preferences. With this new customer experience, GAP is expected to accelerate its ongoing digital transformation.

For its fiscal second quarter, ended July 31, 2021, GPS' net sales increased 28.6% year-over-year to $4.21 billion. The company's gross profit increased 58.7% from its year-ago value to $1.82 billion. Also, its operating income increased 460.3%% from the prior-year quarter to $409 million. The company's net income stood at $258 million, versus a $62 million net loss in the prior-year quarter.

GPS' revenue is expected to increase 28% year-over-year to $17.66 billion in its fiscal year 2022. The company has surpassed EPS estimates in three of the trailing four quarters. Its EPS is expected to increase 201.4% in the current year and 370.6% in the current quarter. Over the past year, the stock has soared 40.5% in price.

GPS' POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system. Also, the stock has a B grade for Growth, Momentum, and Quality.

In addition to the POWR Rating grades we've just highlighted, one can see GPS' ratings for Value, Stability, and Sentiment here. GPS is ranked #9 of 64 stocks in the A-rated Fashion & Luxury industry.

Abercrombie & Fitch Co. (ANF)

ANF is a New Albany, Ohio-based American lifestyle retailer that focuses primarily on casual wear. The company also provides shoes, accessories, occasional wear for men, women, and kids. Hollister; Abercrombie & Fitch; Abercrombie kids; Moose; Seagull; and Gilly Hicks, are the brands under ANF. The company operates in two segments: Hollister; and Abercrombie.

Last month, one of ANF's brands, Abercrombie & Fitch, collaborated with The Knot, a leading digital wedding planner, to launch The Knot's "Best Dressed Guest" collection. This new section will provide ANF's customers a versatile collection of feature dresses, pantsuits, button-ups, and other wedding wear.

Also last month, Abercrombie & Fitch partnered with a retail and customer service powerhouse Zappos to launch an exclusive footwear collection. This collection will feature a wide range of sizes and is designed to style with Abercrombie & Fitch denim fits perfectly. With this new range of shoes, the brand should cater to the customers' growing demands.

ANF's net sales increased 23.8% year-over-year to $864.85 million in the second quarter, ended July 31, 2021. The company's gross profit increased 33% from its year-ago value to $563.49 million. In addition, its operating income increased 711.6% from its prior-year quarter to $114.79 million. The company's net income increased 1807% year-over-year to $110.46 million.

For the fiscal year 2022, analysts expect ANF's revenue to increase 20.5% year-over-year to $3.77 billion. It has surpassed EPS estimates in three of the four trailing quarters. The company's EPS is estimated to increase 698.6% in the current year. The stock has gained 62.7% in price over the past nine months and 140.9% over the past year.

It's no surprise that ANF has an overall B rating, which equates to a Buy in our POWR Rating system. Also, the stock has an A grade for Quality, and a B for Value and Momentum.

Click here to see the additional POWR Ratings for ANF (Growth, Stability, and Sentiment). ANF is ranked #14 in the Fashion & Luxury industry.

Note that ANF is one of the few stocks handpicked by our Chief Value Strategist, David Cohne, currently in the POWR Value portfolio. Learn more here.

Guess?, Inc. (GES)

Incorporated in 1981, Los Angeles-based GES is a clothing and retail brand that markets and distributes a wide range of apparel, shoes, accessories, watches, and handbags for men, women, and kids. The company's five operational segments include Americas Retail; Americas Wholesale; Europe; Asia; and Licensing. It directly operates 1,046 retail stores in America, Europe, and Asia and is involved with an additional 524 retail stores worldwide.

In April, GES collaborated with FriendsWithYou, to launch a collection of colorful silhouettes and fabrications. With this new collection, GES' customers should experience a sense of celebration and experience their own creative expression and the fresh new outlook of the artists worldwide.

For the second quarter, ended July 31, 2021, GES' revenue increased 57.7% year-over-year to $628.62 million. The company's total segment earnings from operations increased 353.6% from the year-ago value to $117.58 million. Also, GES' gross profit increased 100% from the prior-year quarter to $294.09 million. In addition, its product sales increased 57% year-over-year to $606.69 million. The company's net earnings came in at $63.15 million, compared to a $20.69 million net loss in the prior-year quarter.

Analysts expect GES' revenue to increase 35.6% year-over-year to $2.55 billion in its fiscal year 2022. The company has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. GES' EPS is expected to increase 3,985.7% in the current year. The stock has surged 18.7% in price over the past nine months and 86.1% over the past year.

GES' strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system.

The stock has an A grade for Value, and a B grade for Momentum and Growth. We've also graded GES for Quality, Stability, and Sentiment. Click here to access all of GES ratings.

In the same industry, GE is ranked #23 of 64 stocks.

LEVI shares were trading at $26.55 per share on Friday morning, up $0.04 (+0.15%). Year-to-date, LEVI has gained 33.14%, versus a 20.61% rise in the benchmark S&P 500 index during the same period.

About the Author: Priyanka Mandal

Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research.

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