Apparel Stocks Wearing Gains Ahead of Key Earnings

Surging digital sales and activewear demand support the group

Apparel stocks moved higher Monday as investors anticipate solid quarterly results from industry giants Under Armour, Inc. (UAA) and Ralph Lauren Corporation (RL) before Tuesday's opening bell. The group continues to benefit from surging e-commerce sales and healthy demand for activewear as people spend more time at home during the pandemic. Leading players have also remained in focus through innovative digital marketing strategies and promotions to entice consumer engagement.

Key Takeaways

  • Analysts expect online sales and digital marketing initiatives to drive apparel stocks' quarterly earnings.
  • Under Armour shares broke above a three-month downtrend line on heavy volume, suggesting that investors expect upbeat earnings and an improved full-year outlook.
  • A shift in momentum in Ralph Lauren shares could see bulls run the price up to key resistance at $127.50, followed by a possible test of the 2021 high at $142.06.

Let's review each company's upcoming earnings release and analyze the charts to gain clues about future price direction.

Under Armour, Inc. (UAA)

With a market value nearing $9 billion, Under Armour manufactures and sells athletic apparel, footwear, and accessories. Analysts expect the Baltimore-based company to report second quarter (Q2) earnings of 5 cents per share, reversing a loss of 31 cents per share in the year-ago quarter. Traders should watch for an earnings surprise, given the company has topped bottom-line expectations by an average of 286% over the past four quarters. Throughout the pandemic, the apparel manufacturer has expanded its direct-to-consumer business and built brand strength through enhanced customer connections. Under Armour stock has gained 21.64% on the year but has slipped around 9% over the past three months as of Aug. 3, 2021.

The share price convincingly broke above a three-month downtrend line Monday on heavy volume, suggesting that investors expect upbeat earnings and a possibly raised full-year outlook. A close above the closely watched 50-day simple moving average (SMA) also added conviction to the move. Active traders who enter at these levels should consider setting a take-profit order near a horizontal line of resistance at $24.50 while protecting capital with a stop placed just beneath the red trendline.

Chart depicting the share price of Under Armour, Inc. (UAA)

A take-profit order (T/P) is a type of limit order that specifies the exact price at which to close out an open position for a profit. If the price of the security does not reach the limit price, the take-profit order does not get filled.

Ralph Lauren Corporation (RL)

Ralph Lauren markets and distributes lifestyle products, including apparel, footwear, eyewear, jewelry, leather goods, home products, and a range of fragrances. Wall Street forecasts that the apparel giant will post a fiscal first quarter (Q1) adjusted profit of 87 cents per share on revenues of $1.22 billion, which would represent top- and bottom-line growth of 149.7% and 147.8% from a year earlier. Investors will be looking to see if growing sales in European and Asian markets, coupled with improved omnichannel capabilities, will translate into better-than-expected earnings. Trading at $117.99, with a market capitalization of $8.67 billion and offering a dividend yield of 2.42%, the stock has returned 13.74% year to date (YTD), underperforming the industry average over the same period by about 2%. Over the past three months, the shares have fallen 13.44%.

Ralph Lauren shares broke out above a multi-month trendline Friday, with gains accelerating yesterday on rising volume ahead of earnings. The shift in momentum points to a positive quarterly report that could see bulls run the stock up to key overhead resistance at $128.50, followed by a possible test of the 2021 high at $142.06. Those who enter here should think about setting a stop-loss order either under yesterday's low or beneath the weekly low at $108.60, depending on personal risk tolerance.

Chart depicting the share price of Ralph Lauren Corporation (RL)

A bull is an investor who thinks the market, a specific security, or an industry is poised to rise. Investors who adopt a bull approach purchase securities under the assumption that they can sell them later at a higher price.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.

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