Do These 3 Clothing Stocks Belong in Your Portfolio for the Remainder of 2018?

Roots Corp. (TSX:ROOT) and other clothing stocks have soared in 2018, but it will be a tall order to keep up the pace of growth in the latter half of this year.

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Statistics Canada released retail trade numbers for February on April 20. Overall retail sales climbed 0.4% in February with higher sales at new car dealers and general merchandise stores leading the way. Sales at clothing and accessories stores were down 1.4% with all stores in this sub-sector posting declines in February.

Retail e-commerce sales reached $1.1 billion in February, which represented 2.7% of total retail trade. Retail e-commerce climbed 14.6% year over year.

Some of the top Canadian clothing stocks have performed quite well in the opening months of 2018. This in contrast to a broader decline on the S&P/TSX Composite Index. Should investors count on clothing stocks to provide growth in their portfolios as we approach the midway point of 2018? Let’s take a look at three of the top clothing stocks today.

Aritzia Inc. (TSX:ATZ)

Aritzia is a Vancouver-based design house and fashion retailer focusing on women’s apparel. Shares of Aritzia have dropped 2.3% in 2018 as of close on April 26, but the stock is up 2.9% month over month. The company is expected to release its fourth-quarter results on May 10. Aritzia is projecting profit to be flat year over year.

In the third quarter of fiscal 2018, Aritzia saw net revenue rise 9.6% year over year to $204.4 million, and gross profit margin reached 44.8% compared to 44.1% in the prior year. Adjusted EBITDA increased 10% to $50 million. Aritzia benefited from a weaker U.S. dollar in the third quarter, and it also reported progress in ongoing supply chain initiatives.

Roots Corp. (TSX:ROOT)

Roots stock surged in April after what was a difficult start since its initial public offering in October 2017. Shares of Roots have soared 24.4% month over month as of close on April 26 and are now up 17.7% in 2018. The company released its 2017 fourth-quarter and full-year results on April 18.

In the fourth quarter, total sales rose 17% to $130 million, and direct-to-consumer sales climbed 17.6% to $119.8 million. For the full year, total sales increased 15.7% to $326.1 million, and DTC sales rose 16.3% to $284.1 million. Adjusted EBITDA climbed 26.6% to $52.6 million. The company reported impressive holiday sales, which drove results in the fourth quarter.

Roots projects sales between $410 million and $450 million in fiscal 2018 and adjusted net income between $35 million and $40 million.

Canada Goose Holdings Inc. (TSX:GOOS)(NYSE:GOOS)

Canada Goose is expected to release its fiscal 2018 fourth-quarter results in late May. The stock has increased 17.1% in 2018 and 102% year over year. The Canada Goose brand has enjoyed tremendous success in recent years, and it also benefited from rock-solid holiday sales in its most recent earnings release.

Direct-to-consumer revenue climbed to $131.6 million in fiscal 2018 Q3 compared to $72 million in the prior year. Analysts are expecting another big jump in year-over-year revenue the next quarter, but Canada Goose is entering its slow season. Its stock has nearly tripled since its IPO price of $17. Leadership responded to anxiety over supply after Q3 earnings by vowing to ramp up production.

Canada Goose remains the most attractive clothing stock on the market. It is a good bet to post eye-catching earnings in May, but at its current price the stock is simply too pricey with so much good value still available on the TSX.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned.

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