As LA Market Week gets set to kick off for fashion brands this weekend (1), major brands could see some extra focus. This is a critical time for fashion brands because apparel is actually emerging as an unlikely growth market opportunity due to the reopening dynamic in the wake of the global COVID-19 pandemic. (2)
It’s not rocket science if you think about it.
People went two years in cultural “hermit” mode, conducting meetings over Zoom or audio only, avoiding restaurants, bars, public meeting places, concert halls, sports events, nightclubs – anywhere where people might care how they looked – due to the risk of viral infection in social settings.
As a consequence, the fashion industry was one of the hardest hit spaces in the stock market. (2)
But it may turn out that abstaining from fashion consumption simply amounts to a recipe for pent-up demand now that we are all emerging back out into the world, suddenly concerned again about what we are wearing.
We are also generally a bit bigger around the middle according to a few studies (3). We ate more, moved less, and were less concerned about our appearance for two years. As a result, we gained weight. A lot. That translates into a need for new clothes because the pre-pandemic wardrobe doesn’t fit quite as well. (4)
To sum up, fashion brands could be poised for a near-term boom as the post-pandemic reopening process plays out, resulting in pent-up demand for apparel augmented by the need to upsize wardrobes. That could extend as people eventually get their diet and gym routines ramped up and then need to go shopping for another round to downsize the wardrobe.
In any case, the apparel space is rarely situated as a growth leadership theme. But these are unusual times, and savvy investors stand to benefit from a dynamic that the crowd seems to have failed to spot so far.
That could help companies like Nike Inc. (NYSE:NKE), Skechers USA Inc. (NYSE:SKX), lululemon athletica inc. (Nasdaq:LULU), Stitch Fix Inc. (Nasdaq:SFIX), TJX Cos. (NYSE:TJX), and Target Corp. (NYSE:TGT).
Farfetch and FBC Holding in Focus
However, there are a couple of names that might deserve extra attention because they’ve embraced a model that capitalizes on top brands through marketing networks, hubs, and stores: Farfetch Ltd. (NYSE:FTCH) and FBC Holding Inc. (OTC US:FBCD).
Both look especially interesting and could represent significant opportunities as the growth theme discussed above plays out over coming months.
Farfetch Ltd. (NYSE:FTCH) bills itself as the leading global platform for the luxury fashion industry. The company was founded in 2007 by José Neves and began as an e-commerce marketplace for luxury boutiques around the world.
Today, according to company materials, the FARFETCH Marketplace connects customers in over 190 countries and territories with items from more than 50 countries and more than 1,400 of the world’s best brands, boutiques and department stores, delivering a truly unique shopping experience and access to the most extensive selection of luxury on a single platform.
Farfetch Ltd. (NYSE:FTCH) recently announced the closing of the $200 million common equity minority investment by FARFETCH Limited (NYSE: FTCH), the leading global platform for the luxury fashion industry, in NMG, and the signing of the commercial agreements with FARFETCH Platform Solutions (FPS). NMG will use the proceeds to further accelerate growth and innovation through investments in technology and digital capabilities to make life extraordinary for its customers.
“We are pleased to share the successful closing of the investment by FARFETCH in NMG and now that the commercial agreements are final, we are excited to transition to realizing the important benefits of this partnership,” said Geoffroy van Raemdonck, CEO of Neiman Marcus Group. “FARFETCH’s investment demonstrates its confidence in our omnichannel strategy, and we look forward to partnering with them to continue revolutionizing the luxury customer experience and delivering value to all our stakeholders.”
The context for this announcement is a bit of a bid, with shares acting well over the past five days, up about 17% in that timeframe. Shares of the stock have powered higher over the past month, rallying roughly 17% in that time on strong overall action.
Farfetch Ltd. (NYSE:FTCH) managed to rope in revenues totaling $514.8M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 6.1%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels exceeding current liabilities ($1B against $865.6M). (6)
FBC Holding Inc. (OTC US:FBCD) has a similar model in terms of reselling top luxury brands through its Hyperviolent distribution business (https://hyperviolent.com), where it sells apparel from leading names including Dior, Adidas, COMME de GARCONS, Palm Angels and other trendsetting labels. However, when compared alongside FTCH, FBCD is much earlier stage name that trades much cheaper, with a market cap of only just above a million dollars at present. (7)
FBCD also has its own bourgeoning brand, Formrunner (https://formrunnerapparel.com/), which is a wholly owned subsidiary of FBC Holding, Inc. Formrunner Apparel Inc. carries a variety of Top-Notch Streetwear & Accessories located in Scottsdale, Arizona.
FBC Holding Inc. (OTC US:FBCD) most recently announced that it is exhibiting at Label Array located at the California Market Center in downtown Los Angeles from June 13th-15th.
According to its release, with its rich legacy as the first wholesale fashion building on the West Coast, the newly transformed CMC continues to be the LA Fashion District’s premier hub connecting Buyers and Brands during LA Market Week. As the relaunched CMC grows and evolves, each new LA Market presents a fresh and exciting selection of new Showrooms and new Brands for retailers to shop, in addition to longtime favorites. Formrunner Apparel is always working diligently to expand and bring in additional streams of revenue, and this is a perfect opportunity to do so. (8)
President & CEO Lisa Nelson stated in the release, “After making successful connections at the Las Vegas Fashion Event, we are beyond thrilled to draw in more multinational companies to collaborate and work with! Doing these events are extremely beneficial in every aspect of the business and we can’t wait to yet again see the results.”
FBC Holding Inc. (OTC US:FBCD) is a penny stock trading on the OTC. But the company is showing tangible signs of growth at the brand level, and shares of the stock have been moving higher over the past month as the company ramps up its core model, up as much as 150% in that time after sinking to a successful test of the $0.0002/share level in May. (9)
References:
- https://www.californiamarketcenter.com/eventscalendar
- https://www.fool.com/investing/stock-market/market-sectors/consumer-discretionary/apparel-stocks/
- https://www.muhealth.org/our-stories/pandemic-weight-gain-its-thing
- https://www.health.harvard.edu/staying-healthy/pandemic-weight-gain-not-your-imagination
- https://finance.yahoo.com/news/farfetch-neiman-marcus-group-announce-171500438.html
- https://www.marketwatch.com/investing/stock/ftch?mod=search_symbol
- https://www.otcmarkets.com/stock/FBCD/security
- https://www.otcmarkets.com/stock/FBCD/news/FBC-Holding-Inc-FBCD-Set-to-Exhibit-at-California-Market-Fashion-Week-in-Los-Angeles?id=360147
- https://www.tradingview.com/chart/?symbol=OTC%3AFBCD
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