The S&P/TSX Composite Index got off to a rocky start, as trading re-opened on August 7. The index shed triple digits as a significant international sell program kicked off in the morning. The source of the sell-off is unknown, but there was speculation that it could be connected to the diplomatic crisis between Canada and Saudi Arabia.
The dip gives investors another chance to re-evaluate their portfolios, as a number of sectors have started to struggle in the second half of 2018. One surprise throughout the year has been the performance of several of the top clothing companies. The decline of traditional retail combined with the fickle nature of the fashion industry has led many to sour on clothing stocks in recent years, but new companies have revitalized interest with a drive toward e-commerce.
Today, we are going to look at two clothing stocks that have performed very well in 2018 so far. Which is the better growth stock to bet on in the late summer? Let’s take a look.
Back in early July, I’d picked Aritzia as my top clothing stock to own this summer. Shares of Aritzia have climbed 27% in 2018 as of morning trading on August 8. The stock spiked following the release of its fiscal 2019 first-quarter results on July 11.
Aritzia had a magnificent start to fiscal 2019. Net revenue rose 15% year over year to $167 million, and the company achieved comparable sales growth of 10.9%. Adjusted EBITDA climbed 18.4% to $28.4 million, and adjusted net income surged 22% to $15.2 million. Aritzia also opened two new stores in Greater Toronto and Calgary.
The jump in net revenue was primarily attributed to continued strength in the company’s e-commerce business, which it has looked to bolster in recent quarters. It also benefited from six new stores and the expansion of another eight stores since the first quarter of fiscal 2018. For the remainder of fiscal 2019, Aritzia is forecasting low to mid-teens revenue growth and the opening of four additional stores.
Canada Goose stock has climbed 84% in 2018 so far. Back in June, I’d discussed the release of its fiscal 2018 full-year results. This propelled the stock to an all-time high of $91.50 in late June. Shares have since petered off, and the stock has shed nearly $20 in value from its peak.
Canada Goose stock has powered well above the industry average in price to earnings and price to sales. Overvaluation has been a concern since the stock finished strong in the latter half of 2017. The company is now months away from its prime season, and leadership has its sights set on expansion into a highly lucrative Asian market.
Which stock should you buy today?
In the near term, I like Aritzia to outperform Canada Goose on the back of its most recent quarterly report. However, investors should be willing to look to entry points on Canada Goose, as its stock exhales from all-time highs set in the early summer.
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Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned.