Reuters
- Bank of America is expecting younger consumers eager for the economic reopening to have a "voracious appetite" for new apparel.
- The bank added that it sees signs of improving sales as early as the first quarter, with earnings upside in the second quarter and beyond.
- Bank of America recommended buy-rated stocks such as Urban Outfitters, Aritzia, and Revolve.
- Sign up here for our daily newsletter, 10 Things Before the Opening Bell
As the US economy sees clearer signs of a summer reopening amid vaccine momentum and new stimulus money, Bank of America is expecting younger consumers weary of the pandemic to have a 'voracious appetite' for new apparel.
In a note published on Wednesday, the bank said apparel spending will kick off, aided by the warm weather, and thanks in large part to millennials and Gen Z customers. The bank added that it sees signs of sales improvement as early as the first quarter, with earnings upside in the second quarter and beyond.
"Many in this cohort will receive stimulus checks, which should arrive as the weather is improving and their closets are stale after little to no Spring/Summer 2020 purchases. The ability to not only go out but to post freely about it on social media is a big change from the past twelve months and should drive a surge in spending," the analysts wrote.
Bank of America recommended buy-rated stocks such as Urban Outfitters (8.4% upside), Aritzia (10.3% upside), and Revolve (23.6% upside). The bank said these companies target consumers with "many choices of fashion-forward product." The bank also pointed to a competitive advantage these brands have, which is the ability "to chase into the demand using airfreight."
Most brands, the bank explained, use cargo ships, which will limit their abilities to replenish with new designs.
In a separate report, BofA analysts said aggregated credit and debit card data show that stimulus was spent on clothing, specifically the ones received in January.
"We expect a similar if not even more pronounced effect for the most recent round of stimulus," the bank said.
The bank's monthly consumer survey also revealed that that the top spending category for 6.1% of consumers is "apparel, footwear, and accessories." More millennials and Gen Z, around 8.6%, rated those categories as their top buys.