As we navigate through the early months of 2024, investors looking to diversify their portfolios might find the fashion industry intriguing. Given its cyclical nature, apparel and textile stocks demand a nuanced understanding, especially in the current economic climate.
Drawing insights from recent analyses and market trends, let's delve into the best apparel stocks to buy this year and explore the viability of fashion stocks as investments.
The Best Luxury Stocks To Watch In 2024:
The apparel industry, sitting firmly within the consumer discretionary sector, experiences fluctuations aligned with the overall economy. Styles and consumer demands evolve, impacting the performance of companies in this sector. The global fashion industry witnessed a significant boom in revenue during 2020-21, with a 21% growth, according to McKinsey & Co.
However, the following year saw this growth dissipate amidst inflation and post-pandemic challenges. Despite these setbacks, the luxury sector is anticipated to rebound in 2024, while the broader fashion market may face hurdles in achieving substantial growth.
Considering these dynamics, investors should focus on companies with strong fundamentals. Among the standout apparel and textile stocks are:
| Name | Ticker | Industry | EBIT Margin |
|---|---|---|---|
| Hermès | RMS | Luxury Goods & Apparel | 42.2% |
| Kering | KER | Luxury Goods & Apparel | 26.8% |
| LVMH | LVMHF | Luxury Goods & Apparel | 26.4% |
| Burberry | BRBY | Luxury Goods & Apparel | 19.7% |
| Estée Lauder | EL | Beauty Goods | 7.8% |
Also, take a closer look at these companies:
TJX Companies, Inc. (NYSE: TJX), with a robust market capitalization of $111.13B, this company known for its impressive revenue growth and positive sales trajectory over the past five years.
Ross Stores, Inc. (NASDAQ: ROST) follows, valued at $48.18B. Its business model, focused on off-price retailing, offers resilience against economic downturns.
Urban Outfitters, Inc. (NASDAQ: URBN), also has shown consistent revenue growth and is projected to deliver positive earnings growth over the next five years.
These companies were selected based on criteria including minimum market capitalization, revenue growth, profit growth forecasts, positive returns over the last twelve months, and reasonable valuations. Their ability to meet these requirements indicates a potential for better returns over time, making them interesting to watch in 2024.
Are Fashion Stocks a Good Investment?
Investing in fashion stocks, particularly luxury brands, requires appreciating the sector's unique characteristics. Luxury brands, known for their high-quality, expensive products, often perform well regardless of the economy's state. They cater to affluent customers less affected by price changes, which can provide a buffer during economic downturns. Brands like Hermès, Moncler, and LVMH have maintained high profit margins and strong returns on capital, underpinned by their long-standing histories and brand appeal.
However, the broader apparel sector's attractiveness as an investment hinges on several factors. The cyclical nature of fashion trends and economic fluctuations means that while certain segments, like luxury goods, can offer stability and growth, others may face challenges.
Investors must consider these dynamics, focusing on companies with solid fundamentals, growth prospects, and resilience to economic shifts.
