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Nike and 3 Other Apparel Stocks to Watch for in Q3

Shares of athletic apparel and footwear behemoth, Nike Inc.NKE leaped 8.3% in the afterhours trading session yesterday, more so because the company displayed exceptional growth in future orders and delivered an outstanding first-quarter fiscal 2016 performance.

Nike's earnings of $1.34 per share increased 23% year over year and crushed the Zacks Consensus Estimate of $1.19. Net sales in the first quarter rose 5% to $8,414 million, outperforming the Zacks Consensus Estimate of $8,217 million.

Excluding currency swings, sales rose to as much as 14% due to increased sale of higher-priced products at both the company's stores and online as the company continues to bring innovative products to consumers, coupled with the "athleisure" trend catching up in the U.S. Moreover, the company is bubbling with the strength that is being witnessed across all markets, particularly in China where revenue grew 30%.

Further, we believe the company is positioned for another strong quarter ahead as its worldwide future orders, scheduled for delivery from September through January, registered handsome growth of 17% excluding currency effects and 9% on a reported basis.

Additionally, we expect this Zacks Rank #3 (Hold) company to gain from the increasing popularity of the athleisure fashion, where people are opting to put on their athletic or workout clothes and footwear even outside the gym. This trend has been sweeping the U.S. retail sector, acting as a tailwind for many players in the athletic footwear and apparel industry.

Consequently, we bring you some of Nike's wholesale partners as well as other stocks which may gain from the company's outperformance or the trends that are driving the stock.

Topping our list is Foot Locker Inc.FL , which is one of Nike's wholesale partners. The shares of this athletic shoes and apparel retailer rose 1.5% in the afterhours trading session yesterday, following Nike's strong quarterly results. Moreover, this Zacks Rank #1 (Strong Buy) company has delivered positive earnings surprises in the trailing eight quarters and boasts of long-term growth rate of 11.5%.

The company is expected to witness earnings growth of 18.3% in fiscal 2015 and 11.1% in fiscal 2016. Further, the Zacks Consensus Estimate has been showing an uptrend over the past 60 days. The stock has surged roughly 32% year to date.

We also suggest investing in Skechers U.S.A. Inc.SKX , another athletic footwear and apparel retailer that has been benefiting from the athleisure trend. Alike Nike, the stock is committed to offering innovative products and increasing distribution channels. This Zacks Rank #1 stock has amassed a year-to-date return of whopping 152.7%.

The Manhattan Beach, CA-based company has delivered earnings surprises in six of the trailing seven quarters along with an average positive beat of 20.2% over the trailing four quarters. It is expected to witness earnings growth of 77.6% in fiscal 2015 and 60.1% in fiscal 2016. The Zacks Consensus Estimate too, has been on the rise over the past 60 days.

Another Zacks Rank #1 stock that looks promising is Columbia Sportswear CompanyCOLM . Shares of this apparel retailer have surged 35.8% so far this year. An average positive earnings surprise of 23.9% over the trailing four quarters and long-term earnings growth rate of 12.5%, make this Portland, OR-based player quite an attractive investment option. The company is expected to witness earnings growth of 14.8% in fiscal 2015 and 12.9% in fiscal 2016. The Zacks Consensus Estimate has also been trending upward over the past 60 days.

Bottom Line

Clearly, Nike is on a roll benefitting from its simple policy of making customers in the focal point and living up to their expectations. With athleisure wear gaining popularity and apparel companies racing to get a share of this, these companies appear to be in good shape for the upcoming quarter with their strong fundamentals.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

NIKE INC-B (NKE): Free Stock Analysis Report

COLUMBIA SPORTS (COLM): Free Stock Analysis Report

SKECHERS USA-A (SKX): Free Stock Analysis Report

FOOT LOCKER INC (FL): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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