Dreamstime.com
I’ve been thinking about fashion, which wasn’t supposed to happen. My plan at work has long been to stick with suits and dress shoes—a strategically nondescript and immediately forgettable mix of Brooks Brothers and Allen Edmonds—for a set-in-his-ways look I can ride out for another decade or two.
For weekends, I feel that my wardrobe still holds up. It includes L.L. Bean golf shirts and New Balance sneakers, an aging-dad power combo best accessorized with groaning loudly while easing into patio furniture. But the pandemic has left me less sure about the suits.
For more than a year, professionals have been wearing fleece below the Zoom line, and in some cases above it. An unspoken consensus seems to be forming around urban workers returning en masse to their offices around Labor Day. Suppose I go back in a suit, and I’m the only one? I’ll stand out like a Times Square street performer, and with no disrespect to handsy Elmo or the underpants cowboy, that’s not what I’m going for. Then again, what if I dress down only to learn that everyone else has pent-up demand for dressing up?
Also, my suit pants resist buttoning at the moment, but let’s not get sidetracked with logistics.
J.P. Morgan expects U.S. apparel revenue to jump 21% this year from last year’s depressed level, and to come in 6% above the more normal revenue seen in 2019. A recent Jefferies survey of women shows that more than 60% say that their wardrobes are out of style and they plan to do more shopping soon.
Apparel has been a deflationary good for decades, but in May, prices were up 5.6% from a year ago, topping the overall inflation rate. Covid-19 has claimed thousands of clothing stores, leaving survivors with more pricing power. Supply-chain jam-ups have raised shipping costs. Yarn-spinners and other textile players are short on workers. Demand is surging.
I’m starting to worry about a nationwide run on pants come August. But I don’t want shoppers to panic—at least not before I’ve had a chance to place my orders. Whatever happens, the apparel industry is poised for a stretch of solid profitability.
Among mass merchants, J.P. Morgan recommends shares of
(ticker: TGT), which stands to benefit from fewer rival stores. Among brand owners, it likes
(NKE),
V.F. Corp.
(
C), and
(LEVI). Its picks for specialty stores include
(AEO),
(BOOT), and
(GPS). Even once we get beyond “RTO,” as Wall Street is calling our return-to-office moment, inventories could remain lean going into the critical Christmas season.
Wells Fargo Securities analyst Ike Boruchow says investors should be careful to distinguish between thriving stores and attractively priced stocks. For example, he is impressed with
(LULU), the mainstay for ladies’ yoga tights that’s making a play for men. “Full disclosure, I was wearing a lot of Lululemon to work prepandemic,” says Boruchow, who highlights the company’s stretchy, $128 ABC jeans and Commission chinos. “You throw that on with a casual button-down shirt, and that’s kind of the new look of what used to be a suit and tie.” But he cut his rating on the stock to Equal Weight from Overweight a year ago.
Boruchow likes shares of
(RL), which was hit hard by the pandemic and therefore has much to gain from a return to normal shopping patterns. And he’s bullish on
(TDUP), which collects and resells used clothing.
Don’t forget accessories. Boruchow says the sharp acceleration toward online shopping during the pandemic leaves handbag sellers
(TPR) and
(CPRI) well positioned. Clothing sellers would generally prefer that shoppers do business in stores, where fixed costs are high and need to be covered, rather than online, where the cost of order fulfillment is largely variable. But handbags are an exception. Prices are high enough to absorb shipping costs, and return levels are low because sizing isn’t an issue.
I spoke this past week with the chiefs of two relatively young clothiers. Sarah LaFleur runs M.M. LaFleur, which sells women’s clothing and specializes in a look she calls power casual. Think chic but also stretchy, and machine washable. The impetus came from tech workers. “Their male counterparts, they might be wearing hoodies and jeans,” she says. “But that’s not what women are wearing. Yet, if we wear a dress to work, other people think that we’re interviewing.” Her top tip for the first day back to work: Wear a size that fits, and be kind to yourself. “It’s a fraught time for everyone,” she says.
(SFIX) uses human stylists and artificial intelligence to select fashions for customers. Shares fetch $60, up from a November 2017 initial-public-offering price of $15, which makes the company more than half as valuable as Gap.
“Consumers are looking for more guidance and more advice right now,” says Stitch Fix President Elizabeth Spaulding, who will take over as CEO on Aug. 1. Fierce growth in athleisure wear during the pandemic has given way to surges in “fun, going-out clothes of summer”—jumpsuits, rompers, and midi skirts, she says. For me, Spaulding recommended an in-house brand of stretch-knit blazer called Artefact.
Speaking of artifacts, back to my suits. I knew time was not on their side, of course, long before Brooks Brothers and Men’s Wearhouse filed for bankruptcy protection last year. There was that time I visited the chief of a big bank in his office several years ago, and he told me I looked too corporate. Among chat-room momentum traders, “suits” has become a put-down. Now, I fear we’re headed toward seeing suits only on special occasions: weddings, burials, Mark Zuckerberg scoldings by Congress.
I guess now I’ll face harder decisions than whether to wear charcoal or navy with one of my eight identical dress shirts. Unless all you suits out there want to make a last stand for starch come Labor Day.
Corrections & Amplifications
Stitch Fix President Elizabeth Spaulding says midi skirts have surged in popularity during the pandemic. An earlier version of this column incorrectly cited miniskirts.
Write to Jack Hough at jack.hough@barrons.com. Follow him on Twitter and subscribe to his Barron’s Streetwise podcast.
