Large-cap clothing retailer TJX Cos. (NYSE: TJX) has been trading in a bullish zone along its 50-day moving average for the past several weeks. 

It’s not alone, as other apparel retailers are also showing some good chart action as the broad industry began a rally in late October. 

TJX is up 11.14% in the past three months, bolting 5.19% higher in mid-November following the company’s most recent earnings report. The move was due to better-than-expected guidance for the fourth quarter, which the company is expected to report on February 22. Analysts expect $0.89 per share on revenue of $14.25 billion.

Ross Stores Outperforming

TJX is the largest company within the apparel retail industry, with a market capitalization of nearly $92.28 billion. The next largest company is Ross Stores Inc. (NASDAQ: ROST), which operates in a similar off-price retail environment as TJX. However, Ross is less than half the size of TJX, with a market cap of $39.43 billion.

Ross’ price performance has outpaced TJX, returning 23.26% in the past three months.

TJX’s support along the 50-day line indicates a holding pattern before the earnings report. That’s not uncommon, especially following a prior uptrend in the stock, as we’re seeing with TJX. The stock cleared a cup pattern in mid-November, capitalizing on a rally underway in late September, as you can see on the stock’s chart. 

Institutional investors will frequently hold shares at or near a certain level as they wait to hear quarterly results. In particular, big investors want management’s insights into business and economic conditions affecting the company and future earnings and revenue guidance. 

Ross is outperforming the broader S&P 500 consumer discretionary sector, of which both it and TJX are components. That sector, as tracked by the Consumer Discretionary Select Sector SPDR Fund (NYSEARCA: XLY), is up 11.25% in the past three months. 

Research firm Statista said revenue in the apparel market is estimated to be $342.70 billion this year, with a compound annual growth rate of 1.96% between 2023 and 2027. Statista also said 94% of sales will be in the non-luxury category this year, perhaps reflecting concerns about higher inflation and concerns about a recession. 

Wall Street Sees Lululemon Looking Fit & Healthy

But there’s often more to the story: Take a company like Lululemon Athletica Inc. (NASDAQ: LULU), which essentially created the “athleisure” category, which made athletic apparel acceptable streetwear for shopping, dining out, and other non-sports-related activities.

Shares of Lululemon are forming a consolidation that began in early December. It hasn’t notched the recent price performance that TJX and Ross have, but analysts have high expectations for the company. Wall Street is eyeing earnings growth of 27% this year, and another 14% next year. 

As China reopens for business, that is one area where Lululemon is expected to grow revenue in the coming years. Morningstar analyst David Swartz wrote, “Lululemon has a solid plan to expand its product assortment and geographic reach while building its core business. While many firms are looking to compete in its core categories, we believe the firm benefits from the athleisure fashion trend. We will continue to achieve premium pricing due to the brand’s popularity and the styling and quality of its products.”

Swartz added that Lululemon’s “intangible brand asset” is a competitive advantage for the company. 

American Eagle Setting Up To Fly?

Investors seeking a retail apparel stock setting up in a constructive base might give American Eagle Outfitters (NYSE: AEO) a look. The stock’s chart will show you an area of consolidation that corrected 17% from peak to trough. It cleared that consolidation on February 2, but may now add a handle.

As with TJX, it wouldn’t be unusual to see this stock languishing ahead of the earnings report, which is expected on March 1 ahead of the opening bell. Analysts are eyeing $0.30 per share earnings on revenue of $1.46 billion, which would mark decreases from the year-ago quarter.

Analysts expect the company to resume earnings growth in 2024. 

However, upbeat guidance always has the potential to send a stock higher, even as year-over-year earnings and sales decline.