01:25 PM EST, 11/25/2024 (MT Newswires) -- Softline companies are positioned to see upward earnings revisions amid strong demand for clothing, with signs suggesting that the broader retail industry is expected to see a robust holiday shopping season, UBS Securities said on Monday.

Clothing and accessory stores sales were up 2.8% in October on a year-over-year basis, according to the brokerage's research report. Softline stocks have climbed 5.3% since October, outperforming the S&P 500 by 330 basis points.

"The reason is new November market research shows US consumer spending intentions are strong and more importantly getting better," a group of analysts including Jay Sole and Mauricio Serna wrote. "Our conversations with investors suggest they don't expect this."

US consumer spending intentions for soft goods over the next 90 days is up 5.1% from the same point in 2023, according to UBS.

Roughly 25% of consumers plan to spend more this holiday season than they did last year, which is the second-highest number in the past 13 years, according to Sole and Serna. Only 20.9% of consumers have completed their shopping this year, which bodes well for the rest of the season as holiday shopping appears to have started late this year. Clothing is expected to be on the most popular gift list this season.

UBS expects the softlines industry to experience upward earnings-per-share revisions alongside multiple expansion over the next few months.

Success for softlines will likely come "from being premium," according to the analysts. Companies with the highest merchandise margin, such as luxury winter coat maker Canada Goose (GOOS), Versace parent Capri (CPRI), and athletic apparel and footwear company Lululemon Athletica ( LULU ) , are considered by UBS among the most premium stocks.

When considering stocks with strong growth outlooks that aren't fully priced in, UBS recommends Levi Strauss (LEVI), Skechers (SKX), Deckers Outdoor ( DECK ) , Ralph Lauren ( RL ) , On Holding ( ONON ) , Aritzia, Amer Sports ( AS ) , Birkenstock ( BIRK ) , and TJX (TJX).

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