Apparel is one industry that has struggled during the pandemic. With many people jobless and others working remotely, clothing hasn't been a priority. Even Nike, one of the biggest global apparel brands, experienced a 38% sales decline during its fiscal 2020 fourth quarter when many stores were closed. 

However, the smart investor sees opportunity when "there's blood in the streets" as Warren Buffet counsels. Sales are rising as stores reopen and customers indulge their pent-up shopping desires. These three companies are poised to benefit from the resurgence in spending.

Stitch Fix box by a doorstep.

Image source: Stitch Fix.

Stitch Fix

If there was one apparel company that was good and ready for COVID-19, it was Stitch Fix (NASDAQ:SFIX). The company works on an all-digital platform and offers customers the convenience of trying clothes on at home. While people were stuck indoors and switching to online channels, Stitch Fix saw a 9% increase in its active customer base to 3.4 million. Though revenue declined 9% year over year in the fiscal third quarter ended May 2 (which included some of the worst weeks of the pandemic), the company has already begun to see sales recover in May.

Stitch Fix relies on its army of personal shoppers and data-backed algorithms to determine which styles clients might want to buy, which helps it achieve greater sales and customer satisfaction. This feeds into the company's subscription model, called auto-ship, which most clients opt into. That means the company is guaranteed stable monthly sales. However, its relatively new direct-buy option, which allows customers to choose individual items instead of receiving the typical five-piece shipment, tripled in revenue from the second to third quarter. Stitch Fix sees this as an important tool in attracting new customers.

The company currently serves about 25% of its addressable digital market, so there's still a huge opportunity for expansion. 

Teens at a movie theater wearing American Eagle Outfitters clothing.

Image source: American Eagle Outfitters.

American Eagle Outfitters

American Eagle Outfitters (NYSE:AEO), the teen apparel company, had seen high growth before the pandemic as customers flocked toward its contemporary styles. Its Aerie brand, which offers women's undergarments and swimwear, saw explosive growth thanks to shoppers who identify with the brand's body-positive image and marketing. 

Comparable-Sales Growth

Q1 2020*

Q4 2019

Q3 2019

Q2 2019

Aerie

(2%)

26%

20%

16%

Total

(38%)

2%

5%

2%

Data source: American Eagle Outfitters quarterly reports. *Q1 2020 figures for total revenue.

Aerie's on a roll with just a tiny sales decrease during the most difficult weeks of the pandemic but a 12% increase in "total demand" (in-store plus digital revenue) over that period. That really speaks to the brand's appeal and overall strength, which is still doing the heavy lifting for the company. 

American Eagle experienced 33% digital growth during the quarter, which increased to 70% after stores closed. As customers begin to spend again, both brands are poised for a rebound. As of June 3, opened stores had already recovered an impressive 95% of the previous year's productivity rates.

The company also has a healthy cash position, ending the fiscal first quarter with $900 million as stores begin to reopen.

Woman running with shopping bags.

Image source: Getty Images.

The TJX Companies

 TJX (NYSE:TJX) touts itself as recession-proof, which it has demonstrated in the past. Although the company saw a staggering 52% sales decline in its fiscal 2021 first quarter, management reported an uptick as stores reopen.

What's more, both TJX and its shoppers can benefit from retail's overall dip as lockdowns left companies stuck with tons of merchandise they need to unload. While TJX often reassures investors that there's no dearth of available merchandise, this is a situation where no reassurances are needed. 

The company drew down its $1 billion credit line and issued $4 billion in senior notes to pad its liquidity position while sales were compromised, ending the quarter with a comfortable $4.3 billion in cash and cash equivalents as revenue gradually began to increase.

The stock is still down 15% year to date, making it a very attractive time to buy.

In fact, all three of these companies are down from their 2020 highs, which makes it a great time for investors to consider starting or adding to their positions.