MARKET UPDATE 04.28.22
Spiraling down a slope, the current stock market is characterized by loss. With fears of slowing economic growth and predictions of recession and high interest rates, investors are not optimistic about the volatile nature of the current market.
However, the US GDP growth forecast still hovers at close to 3.5% expected in 2022, confirming the continued push of growth within the economy. In addition, the fast fashion global market is expected to grow at a rate of 19% until 2025, due to increased utilization of social media and growth of the youth population.
Be Kind to the Earth: Earth Day and its Monetary Implications
With its official placement on the calendar, Earth Day is a celebration spanning days, weeks, and even sometimes the whole month of April, due to the societal pressures that back it. A part of Earth Day highlights the severity of negative climate implications. Last year alone, the 10 most severe natural disasters developed a $170 billion bill in insured losses.
On the flip side, Earth Day has resulted in a growth of sustainably focused investing opportunities. Currently, the Securities and Exchange Commission is working towards enabling the release of company impacts on climate change alongside earnings reportings, in an effort to enable investors to make educated decisions. Lastly, with ESG financial funds continuing to expand, an estimated $120 billion was invested into sustainable investments in the 2021 fiscal year.
Failed Fast Fashion? : Payment Service Bolt’s Lawsuit with ABG
Authentic Brands Group, the parent company of Forever 21, has filed a lawsuit against payment startup Bolt. As Bolt’s largest customer, this action comes as a strike to Bolt’s business model. ABG states that Bolt failed to deliver purchased technology during integration. In addition, ABG claims that this resulted in a loss of $150 million in online sales for Forever 21’s revenue stream.
In addition, ABG raises the complaint of Bolt overvaluing its integration with Forever 21’s financial operations. With its alleged network of consumers brought on by ABG, Bolt claims to have a valuation of $11 billion. This lawsuit brings about ABG’s claim that due to previous agreements between the two parties, ABG is enabled to purchase a 5% stake in Bolt for $29 million- a stake currently valued to be $500 million in worth.
Stocks to Watch:
With the continued rise of athleisure and ecommerce in modern society, the following apparel stocks are worth noting in the coming months.
LULULEMON ATHLETICA (NASDAQ: LULU)
Share Price: $354.02
Market Cap: 43.44 B
Backstory: Lululemon Athletica is a Canadian athletic apparel retailer, focused on the segment of athleisure. Lululemon was founded in 1998 with a focus on the retail of yoga pants and yoga wear, expanding to the bounds of lifestyle apparel and accessories. Lululemon generated $6.26 billion USD in revenue in the fiscal year 2021.
Current News: Following Lululemon’s “2022 Analyst Day”, the company has released information regarding its intentions to double sales revenue to $12.5 billion USD by 2026, focusing on expansion into men’s wear. This goal follows the 40% growth in revenue which occurred in 2021. Lululemon projects EPS growth to outperform revenue growth in the coming years. Claims suggest product innovation, customer experience, and market expansion to be the key drivers of growth.
STITCH FIX (NASDAQ: SFIX)
Share Price: $9.37
Market Cap: 1.02 B
Backstory: Stitch Fix is an online personalized styling service which sends customized styles to consumers developed from machine learning software, to optimize consumer satisfaction. Clothing is often personalized based on size, budget and style. Founded in 2011, the company had an initial public offering in 2017 with an initial valuation of $1.6 billion. Stitch Fix generated $2.1 billion in revenue during the 2021 fiscal year.
Current News: While Stitch Fix may be the market leader with an estimated 69% market share, Stitch Fix client base has deteriorated by 4% thus far in the 2022 fiscal year. Investors remain pessimistic about the success of the company and expect Stitch Fix to remain unprofitable with a margin of -0.4% in 2022, impacted by high SG&A costs averaging at a rate of 48% of sales. However, Stitch Fix has recently announced the launch of a new campaign, “Stitch Fix It”, geared towards men who have trouble “breaking up with their wardrobes”. Expansion into this new industry is expected to develop new potential for increased revenue growth.