‘In this article, we will discuss the 10 best clothing stocks to buy according to hedge funds, and take an overview of the trends in the clothing sector.
Trends in the Clothing Sector
The internet has changed the way people shop for clothes. Social media platforms and influencers have popularized the “haul culture,” where people order a big box of low-priced clothes online and sift through them. Also colloquially known as the “Shein effect,” people are turning towards fast fashion, ordering clothing that offers an element of surprise upon receiving. Although Shein’s primary suppliers are in China, its customers are majorly US-based. Its global sales reached around $30 billion last year, almost touching the $39 billion in global sales made by Inditex, the old-school fast fashion leader and owner of Zara.
Fashion and apparel rank among some of the most significant industries in the world, creating key value for global economy. According to McKinsey, it would rank as the seventh largest economy in the world if placed alongside the GDPs of individual countries. The industry, however, faced several challenges in 2023, with the United States and Europe experiencing slow regional growth throughout the year. While China started the year with a strong performance, it gradually waned, slowing down in the second half. Even the luxury segment experienced uneven performance and slower sales. The fashion industry in 2024 can thus be described with one word: uncertainty. Weaker economic growth, dwindling consumer confidence, and rising inflation are making it hard for companies to devise suitable performance drivers. A report by Reuters showed that consumers are becoming increasingly picky about the clothes they buy, and are shopping around more. This has resulted in a “patchwork of winners and losers.”
Fashion forecasts by McKinsey show that the industry is expected to grow by 2-4% in 2024, with growth variations across countries and regions. The luxury segment is anticipated to generate the largest economic profit, but that does not mean companies in this sector won’t experience tough economic environments. Global growth forecast for the industry is lower in 2024 compared to 2023, going from 5%-7% in 2023 to 3%-5% as post-pandemic shopping sprees halt. Growth in China and Europe is expected to slow, but the US market shows a completely different outlook. North America’s growth is expected to pace in 2024 after a sluggish 2023, reflecting the region’s more optimistic outlook.
In addition, the current political unrest in Bangladesh is expected to affect the global clothing industry, disrupting the functioning of global apparel retailers ranging from H&M to Zara. With these clothing giants heading into key holiday season, the disruptions might incur heavy losses to US retailers and Bangladesh itself, which is the third largest exporter of clothing in the world as of 2023. Overall, consumer spending patterns have slowed down in the US, with people making do with what’s in their closets before the season changes. The Federal Reserve is also expected to cut interest rates in September. A report by Reuters showed that investors previously bet that the Fed would slash rates by half a percentage point, and are now estimating an approximately 75% probability of a quarter-percentage-point cut in its September meeting. This is expected to drive consumer confidence and ease spending patterns. With that, let’s look at the 10 best clothing stocks to buy.
10 Best Clothing Stocks To Buy Now
Our Methodology
For this article, we used the Finviz stock screener to identify over 20 clothing stocks then narrowed our list to 10 stocks with the most positive upside from current levels, and listed the stocks in ascending order of upside potential, as of August 19. We only chose stocks that had a market cap of over 2 billion.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Clothing Stocks to Buy
10. Abercrombie & Fitch Co. (NYSE:ANF)
Upside from Current Levels: 9.33%
Abercrombie & Fitch (NYSE:ANF) had a fall from grace after its 90’s heyday, with the 2022 Netflix documentary “White Hot: The Rise and Fall of Abercrombie & Fitch” showing marketing and fashion missteps by the company. But the fall was temporary, as the international near-luxury lifestyle brand has made a comeback into the lives of GenZ and Gen Alpha. This turnaround was prompted by a trend-driven collection and trendy promotional strategies, bringing out lighter and looser clothing items well suited for everything: from gym to casual hangouts.
In 2019, Abercrombie & Fitch (NYSE:ANF) reinvented its entire marketing and product design to move away from tight-fitted t-shirts and perfume-filled mall stores. It used to be a predominantly teen brand in the 90s, quite infamous for its shirtless models. But then came the shift with new management: the brand has now revamped its strategy, focusing on inclusion and offering work-appropriate wear, wedding wear, and even baggy jeans in all shapes and sizes.
With its revamped portfolio of less revealing and logo-less apparel, Abercrombie & Fitch (NYSE:ANF) holds a competitive advantage. It is now appealing to millennials and GenZ, going beyond its previously restricted target market and becoming profitable. It reported a 22% year-over-year growth in revenue, which amounted to $1 billion during the February-April quarter, a record for the company. The growth rippled across the globe, with revenue increasing by 23% in the Americas and 19% in Europe, with the highest popularity in Germany and the UK. The company’s CEO anticipated slower growth in the US after the 2023 revival, but also claimed that the company was excelling in the overall market and held a substantial opportunity for international growth, especially in countries like the UK.
Here’s what Chartwell Investment Partners, LLC said about Abercrombie & Fitch Co. (NYSE:ANF) in its third-quarter 2023 investor letter:
“Within the Carillon Chartwell Small Cap Growth Fund, information technology and industrials were the strongest-performing sectors, with strong stock selection leading to alpha generation. Abercrombie & Fitch Co. (NYSE:ANF) reported very strong earnings driven by significant margin improvement that resulted from much lower shipping and freight costs compared to last year.”
Is Abercrombie & Fitch (NYSE:ANF) cheap? The stock is currently trading at a P/E ratio of 16.37 at a 5.13% premium to its sector. So while we cannot call the company cheap, it has potential for growth. The future looks promising for the company: analysts estimate a 51% year-over-year increase in its earnings by 2025. Its median price target of $155.25 indicates an upside of 9.33% from current levels. 48 hedge funds hold Abercrombie & Fitch (NYSE:ANF) as of Q2 2024.
9. Carter’s, Inc. (NYSE:CRI)
Upside from Current Levels: 12.52%
Carter’s, Inc. (NYSE:CRI) is all about babies and young kids. It manufactures and sells apparel and related accessories for this age group under its vast portfolio of brands, including Carter’s, OshKoshB’gosh, Precious Firsts, Just One You, Child of Mine, Simple Joys, and Skip Hop. Carter’s Inc. is expanding its international footprint since Mexico and Brazil had high demand for the company’s products, offsetting slower sales in North America.
The children’s apparel market in the US stands at approximately $28 billion, with Carter’s, Inc. (NYSE:CRI) holding around 10% of the total market share over the past 12 months, giving it a competitive edge. Baby apparel remained the most popular segment in the company’s age portfolio, contributing around 60% to its total Q1 2024 apparel sales. The company operates through three segments: U.S. Retail, U.S. Wholesale, and International.
Carter’s, Inc. (NYSE:CRI) lost 23.66% of its shares’ value over a 52-week period, primarily due to weak direct-to-consumer trends and cautious consumer spending in the quarter. The combination of accumulated inflation over the past three years and the stop to pandemic stimulus payments has slashed many consumers’ budgets, with baby and young child apparel suffering from the cutbacks as well. However, the consumer demographic is improving with the recent fall in inflation, and store rationalization efforts by the brand are expected to drive a recovery in sales in the coming periods. Analysts expect the company to recover its leadership position in the domain. With rate cuts on the way and improving consumer confidence, Carter’s can experience a strong recovery in sales. Here is what Aristotle Capital Boston, LLC, had to say in its “Small Cap Equity Strategy” second quarter 2024 investor letter:
“Carter’s, Inc. (NYSE:CRI), a leading marketer of baby and young children’s apparel in North America, declined amid a cautious consumer spending environment and weak direct-to-consumer trends for the business during the quarter. We maintain our position as we believe the company has a strong brand in a stable category and that store rationalization efforts and an improving demographic backdrop can drive a sales recovery in the business in periods to come.”
The company’s EPS was $1.04 in Q1 2024, with a 9.09% 1-year increase. Its net profit margin also experienced a 10.91% 1-year increase, going to 5.65%. Carter’s, Inc. (NYSE:CRI)’s median price target of $62.81 presents an upside of 12.52% from current levels. It is currently trading at a forward P/E ratio of 10, at a 33% discount to its sector. Carter’s, Inc. (NYSE:CRI) IS held by 28 hedge funds as of Q2 2024, with Harris Associates holding the highest stake worth $81.54 million.
8. Levi Strauss & Co. (NYSE:LEVI)
Upside from Current Levels: 17.68%
Headquartered in San Francisco, Levi Strauss & Co. (NYSE:LEVI) sells apparel and accessories for men, women, and children across its portfolio of brands, including Levi’s, Dockers, Denizen, Signature by Levi Strauss & Co., and Beyond Yoga. It also sells its products through third-party retailers and directly to consumers through various channels. Levi Strauss & Co. (NYSE:LEVI) is expanding its global presence by targeting stores in Asia, opening its first store in Bangladesh, and strengthening its direct-to-consumer strategy. The brand also reopened its famous store at CentralWorld Mall in Bangkok, Thailand, expanding it to about 4,000 square feet to make it the largest Southeast Asian Levi’s store.
Despite its expanding global presence, the brand faced a fall in its stock price in June, primarily because of exceeding analyst expectations in its Q2 2024 financial results. Analysts had expected the company to earn only $0.11 per share in Q2 2024 with sales of $1.45 billion. However, the company earned around $0.16 per share, nearly 50% higher than analyst expectations, with sales reaching around $1.44 billion.
So why did Levi Strauss & Co. (NYSE:LEVI) stock plummet after exceeding analyst expectations? For starters, the company did not actually earn $0.16 per share, as it was a pro forma number. Instead, the GAAP-adjusted earnings came to $0.04.
On the bright side, the company’s earnings did improve. Sales grew by 8% year over year and gross profit margin was 60.5%. This improvement was accredited to the company’s “transformational pivot to operating as a [direct-to-consumer]-first company,” by its management. Although direct-to-consumer (DTC) sales did not exceed growth in sales as a whole, DTC sales usually do result in higher profit margins, giving Levi Strauss & Co. (NYSE:LEVI) an optimistic outlook.
Levi Strauss & Co. (NYSE:LEVI)’s strength in DTC sales and e-commerce is promising, going parallel to the increasing consumer trends of going direct to apparel companies for shopping. This broader trend may work out in favor of the company, even if its profits might take a hit in the short term. In the longer run, however, this consumer trend may support higher sales while eliminating the need to go through other retailers.
The stock is currently trading at a P/E ratio of 14.86 at a 4% discount to its sector. Overall, the stock sports a consensus Buy rating. Levi Strauss & Co. (NYSE:LEVI)’s revenue has grown with a CAGR of 6.94% in the past three years. Analysts are expecting a 14.91% year-over-year growth in its EPS by 2025. Its median price target implies an upside of 17.68% from current levels. 27 hedge funds hold stakes in Levi Strauss & Co. (NYSE:LEVI) as of Q2 2024.
7. Gildan Activewear Inc. (NYSE:GIL)
Upside from Current Levels: 17.68%
Gildan Activewear Inc. (NYSE:GIL) manufactures and sells activewear, socks, underwear, hosiery, and legwear under its significant brand portfolio, including Gildan, Alstyle, Comfort Colors, American Apparel, Anvil, GOLD TOE, Secret, Peds, and Silks. Formerly known as Textiles Gildan Inc., the company transitioned to Gildan Activewear Inc. in 1995 after deciding to excel in the activewear apparel sector.
The company is known for its blend of affordability and quality, and its 100% cotton t-shirts make it a prominent name in the US print wear industry. It holds a competitive advantage by functioning as a low-cost, vertically integrated manufacturer with capacity-driven growth. Shareholders and investors expressed uncertainty about the company when its 20-year CEO and co-founder Glenn Chamandy was dismissed from his position over serious disagreements about succession and strategy with the board. However, he regained his position after a months-long proxy war after the entire board of directors resigned, causing the new CEO, Vince Tyra, to step down.
Since Gildan (NYSE:GIL) is Chamandy’s family company, his re-entry into management with his substantial experience has somewhat comforted skeptical onlookers. The stock sports a consensus Buy rating, with its median price target of $39.39 presenting an upside of 17.68% from current levels. Gildan Activewear Inc. (NYSE:GIL) is trading at a P/E ratio of 13.32, at a 13% discount to its sector.
Investors are bullish on the stock, with Canaccord Genuity and Citigroup maintaining a Buy rating. Canaccord Genuity also upped their price target to $43 from $42 on 2nd May. The change in management sheds a positive light on the company, which has the potential to grow under its previous operating model. 22 hedge funds held Gildan Activewear Inc. (NYSE:GIL) as of Q2 2024.
6. American Eagle Outfitters, Inc. (NYSE:AEO)
Upside from Current Levels: 17.87%
American Eagle Outfitters, Inc. (NYSE:AEO) is a multi-brand retailer operating internationally and in the US. The company targets a younger demographic through its trendy clothing and accessories, while also offering intimates, apparel, activewear, and swimwear through its Aerie brand. The company boasts strong brand recognition among young adults and teens, focusing on trendy and casual go-to styles. It also targets young women by emphasizing comfort and body positivity.
With more than 1,000 stores across the US, Canada, Mexico, and Hong Kong, American Eagle Outfitters (NYSE:AEO) is focusing its attention on strengthening its online presence to stay on top of the latest trends and compete with other fast fashion brands. The fast fashion company not only offers trendy apparel at affordable prices but also holds the attention of its target audience by quickly adapting to new trends.
The company recently signed the biggest office lease in New York this year for around 338,085 square feet of space in a 20-year deal to consolidate the footprints of the brands in its portfolio. This decision came after an exhaustive search by the company to find the perfect spot that could help it streamline and centralize all its brands under one roof, including Aerie, Offline by Aerie, Unsubscribed, Todd Snyder, and its namesake label.
In terms of valuation, American Eagle Outfitters (NYSE:AEO) is currently trading at a forward P/E of 15.57, which indicates a 26.17% discount to its sector.
In addition, the company reported $5.32 billion in revenue in February 2024, its highest-ever number since February 2020, primarily because of the company’s commitment to its target demographic: GenZ. Overall, the stock sports a consensus Buy rating among analysts. Its median price target indicates an upside of 17.87% from current levels.
5. Kontoor Brands, Inc. (NASDAQ:KTB)
Upside from Current Levels: 18.01%
Kontoor Brands Inc. (NASDAQ:KTB) is a global lifestyle apparel company with a portfolio of brands, including Lee, Wrangler, Rock & Republic. The company was formed in 2019 when VF Corporation spun off its denim brands into a new company: Kontoor Brands. While it also licenses apparel, accessories, and footwear, but denim remains its specialty. It targets a diverse customer base, including women and men of varying ages and income levels.
The company is expanding its specialties, with Lee launching its first-ever golf collection for men in May. formerly famous for its casual apparel, the brand now offers versatile performance-stretch bottoms and tops to transition from officewear to sportswear and provide its customers with a wide array of lifestyle apparel.
While Kontoor Brands, Inc. (NASDAQ:KTB) is not the largest company out there, it has been receiving considerable attention due to its substantial price hike in the last few months. Trading at a forward P/E ratio of 14.55, the company is trading at a 5.30% discount to its sector.
But is Kontoor Brands, Inc. (NASDAQ:KTB) profitable? The company has been growing its revenue at a CAGR of 4.63% over the past three years, and has experienced growth with a CAGR of 19.60% in its diluted EPS in the same time frame.
Kontoor Brands, Inc. (NASDAQ:KTB) holds a consensus Buy rating among analysts, and its median price target of $68.45 indicates an upside of 18.01% from current levels. Kontoor Brands, Inc. (NASDAQ:KTB) is held by 24 hedge funds as of Q2 2024, ranking it one our list of the best clothing stocks to buy.
4. The Gap, Inc. (NYSE:GPS)
Upside from Current Levels: 19.24%
The Gap, Inc. (NYSE:GPS) is a specialty apparel company with a lifestyle brand portfolio encompassing Gap, Banana Republic, Old Navy, and Athleta, targeting various life segments. It has more than 3,500 stores and franchises across the globe, and operates in over 40 countries. Gap’s products include lifestyle and fitness items, adult apparel and accessories, training and sportswear, travel wear, and everyday wear.
The company suffered a fall from grace in the past years, announcing in 2020 that it would close around 30% of its North American Banana Republic and Gap stores by 2024, most of them in malls. The problem was simple: Gap didn’t grow up with millennials, losing the apparel race to trendier brands like Abercrombie & Fitch, American Eagle, and fast-fashion brands like Shein. While it grew with millennials, The Gap, Inc. (NYSE:GPS) failed to capture the hearts of GenZ, the new generation dominating the apparel retail industry.
However, the company is now making a comeback with changed management and revamped strategies. The Gap, Inc. (NYSE:GPS) is working to provide its customers with a new layout, enhanced digital execution, and increased cultural relevance, along with drafting a more transparent pricing strategy. The company has improved its global standing under new CEO Richard Dickson, reducing its inventory by 15% as compared to last year and growing its merchandise margin by 340 points.
These changes resulted in a 3% year-over-year increase in the company’s revenue in Q1 2024, which reached $3.39 billion and outperformed analysts’ estimates of $3.29 billion. The company’s sales growth is attributed to a 3% increase in store sales and a 5% growth in online sales. The stock is trading at a forward P/E of 13.68, a 13% discount to its sector. Analysts expect Gap’s (NYSE:GPS) EPS to undergo a 23.69% year-over-year growth by 2025 .
Analysts following the company have mostly been bullish on the stock, with TD Cowen recently upgrading it from a Hold to Buy rating with a price target of $30, with the primary reason being the company standing in the early transformation stages across all the brands in its portfolio.
The Gap, Inc. (NYSE:GPS)’s remodeling has caught the attention of analysts and investors due to its underappreciated growth potential. Its upgraded outlook is giving Wall Street analysts proof that the new CEO’s turnaround strategy of introducing trendier items and revitalizing marketing efforts is working. The Gap, Inc. (NYSE:GPS) sports a Moderate Buy rating, and its median price target of $23.97 represents an upside of 19.24% from current levels. The company’s shares are currently undervalued, with revised guidelines and management showing promising business growth. 39 hedge funds are bullish on The Gap, Inc. (NYSE:GPS) as of Q2 2024, with Two Sigma Advisors holding the highest stake.
3. Ermenegildo Zegna N.V. (NYSE:ZGN)
Upside from Current Levels: 23.60%
Ermenegildo Zegna N.V. (NYSE:ZGN) is a luxury brand that manufactures and designs menswear, leather goods, footwear, and other accessories under its Zegna and Thom Browne brands. It also offers luxury wear for women and children under Thom Browne. However, it is famous for symbolizing iconic Italian luxury menswear. The company also acquired a long-term license for Tom Ford Fashion by the Estée Lauder Companies in 2023. Ermenegildo Zegna N.V. operates a wide network of luxury flagship boutiques and concessions, and has dressed famous world leaders and celebrities in its quest to solidify its image of Italian luxury. The company is continuing its partnership with Real Madrid, acting as their official luxury travel-wear partner for the 2023-2024 season and dressing one of the largest football teams in the world with its unique style.
Why does Ermenegildo Zegna N.V. (NYSE:ZGN) rank on our list of the best clothing stocks to buy? The company opened up 24 new stores in Q1 2024, taking its total outlets to 277 globally. The company’s revenue stood at €463.2 million ($507.3 million), experiencing an 8% year-over-year increase. Revenues from the ZEGNA brand surpassed the growth of the overall segment, growing to €324.9 million ($355.86 million) in Q1 2024 from €319.3 million ($349.73 million) in Q1 2023. Overall, the Americas led the company’s revenues, with a rise in Direct-to-Consumer (DTC) sales being the primary driver.
The company’s revenue grew by a CAGR of 23.14% in the past three years, and is currently trading at a forward multiple of 21 at a 39% premium to its sector. Ermenegildo Zegna N.V. (NYSE:ZGN)’s median price target of $11.0 indicates an upside of 23.60% from current levels. The stock sports a Moderate Buy rating among analysts. 9 hedge funds hold Ermenegildo Zegna N.V. (NYSE:ZGN) as of Q2 2024.
2. PVH Corp (NYSE:PVH)
Upside from Current Levels: 32.26%
PVH Corp (NYSE:PVH) boasts international brands such as Tommy Hilfiger, Calvin Klien, Warner’s, Olga, and True & Co. in its portfolio. The company also licenses brands such as Michael Kors and Kenneth Cole New York. Its brands target fashion-forward audiences, with Calvin Klien focusing on minimalistic aesthetics and Tommy Hilfiger encompassing the classic American style.
The company is expanding its global presence and recently opened its global flagship store on one of the most celebrated fashion avenues in the world: Paris’ Champs-Élysées. Expanding its consumer engagement, PVH Corp (NYSE:PVH)’s brand Tommy Hilfiger recently joined hands with Mercedes-AMG Petronas Formula One™ Team to launch a limited edition line. Tommy Hilfiger also announced a multi-year partnership with the United States SailGP Team in June, becoming their Official Lifestyle Apparel Partner and ushering in a new era of Tommy Hilfiger’s blend of style and athleticism.
The company operates around 700 outlet stores under the brands Tommy Hilfiger, Calvin Klein, and Van Heusen. As one of the largest global lifestyle companies, PVH Corp (NYSE:PVH) operates in more than 40 countries under 29,000 associates, with the purpose of making Calvin Klein and TOMMY HILFIGER the most desirable lifestyle brands in the world.
FPA Queens Road Small Cap Value Fund stated the following regarding PVH Corp. (NYSE:PVH) in its first quarter 2024 investor letter:
“PVH Corp. (NYSE:PVH) is an apparel company that owns the Tommy Hilfiger and Calvin Klein brands globally. Most of PVH’s earnings come from Europe, where the Tommy and Calvin brands are considered “almost luxury” and PVH has generally recorded high single-digit organic growth with demonstrated pricing power during the preceding decade. CEO Stefan Larsson has done an excellent job revitalizing the company and improving margins at PVH’s moribund U.S. operations. Over the past year, PVH and our other apparel companies have performed well as the worst fears for consumer spending didn’t play out. PVH has become a top five holding for us and our apparel holdings (PVH, GIII, LEVI and DECK) now make up almost 10% of the portfolio. On April 2, post quarter end, PVH announced fiscal 23Q4 results where they missed on earnings guidance for the coming year. The stock is down ~20% from its high but now trades at less than ten times forward earnings. We have held our position.”
PVH Corp (NYSE:PVH)’s revenue grew at a CAGR of 4.63% over the last three years. Analysts estimate the company’s EPS to increase at a 6.22% year-over-year growth rate by 2025. The stock sports a consensus Buy rating among analysts, with potential for growth due to its positive consumer engagement and direct-to-customer (DTC) sales. Its median price target of $103.5 represents an upside of 32.26% from current levels, and it is currently trading a P/E ratio of 9.24 at a massive 40.65% discount to its sector. PVH Corp (NYSE:PVH) has 39 hedge funds as of Q2 2024, with Pzena Investment Management holding the highest stake.
1. Lululemon Athletica Inc. (NASDAQ:LULU)
Upside from Current Levels: 39%
Founded in 1988, Lululemon (NASDAQ:LULU) is an athletic apparel, footwear, and accessories brand with around 38,000 employees. It sells leisure-athletic wear and accessories such as socks, bags, and yoga mats that people can use when engaging in fitness activities. Earlier this year, Lululemon (NASDAQ:LULU) released its first-ever men’s collection, expanding its sales to a whole new avenue. Its new casual and innovative performance footwear also made a debut for the spring and summer 2024 season. Headquartered in Canada, the company partnered with the Canadian Olympic Committee (COC) and the Canadian Paralympic Committee (CPC) to launch its first-ever summer Athlete Kit for the Canadian Team ahead of the 2024 Paris Olympic and Paralympic Games. This is Lululemon (NASDAQ:LULU)’s second time acting as the Official Outfitter of the Canadian Team in a multi-year partnership with CPC and COC.
Is Lululemon (NASDAQ:LULU) a good investment? In Q1, the company’s revenue grew 10% year over year to $2.2 billion, and its comparable sales grew by 6%. However, demand in North America disappointed investors, increasing by only 3% as compared to a 17% growth in Q1 2023. Calvin McDonald, Lululemon’s CEO, attributed the underperformance to an “overly narrow color assortment” in its products, along with a shortage of adequate product sizes that led customers to believe that their desired items were always out of stock. However, the company expects to work on these errors in Q2, and has significant potential to grow.
There are several reasons for this optimism, the foremost being the company’s steady growth over the past years. Lululemon (NASDAQ:LULU)’s revenue jumped from $4 billion to $9.6 billion between FY2019 and FY2023, undergoing a more than double increase. Its net income also grew at a CAGR of 24.5%, from $646 million in 2023 to $1.55 billion in 2024. These reasons give the stock the first spot on our list of the best clothing stocks to buy.
The company’s “The Power of Three x2” strategic goals set in 2022 as a follow-up to the original plan set in 2019 has allowed Lululemon (NASDAQ:LULU) to drive growth by focusing attention on its three pillars: product innovation, guest experience, and market expansion. Overall, the stock sports a consensus Buy rating among analysts, and its median price target implies an upside of 39% from current levels.
Middle Coast Investing stated the following regarding Lululemon Athletica Inc. (NASDAQ:LULU) in its Q2 2024 investor letter:
“I mentioned last quarter and higher above that I like buying quality stocks on sale. Lululemon Athletica Inc. (NASDAQ:LULU), the 2nd worst performer in the S&P 500 this year, qualifies. I published a full thesis on the stock before its most recent earnings, but the basics: the yoga pants and clothing company has had an amazing post pandemic run that is approaching its end. Its growth in the U.S. is slow/non-existent at the moment, but it is growing very fast in China and Europe. I think that international growth is likely to endure, and that its U.S. slowness is likely to be temporary. Lululemon shares are not ‘cheap’, but they are on sale for an average price, and I think the company will grow faster than average over the next five years. I would be wrong if Lululemon is a fad gone bust, or faces a huge post-pandemic hangover as people get used to leaving the house more. We’ll see.”
The company has expanded from one store in Vancouver to nearly 711 stores across the globe, and thus holds sufficient potential to grow into a globally dominant brand. Lululemon (NASDAQ:LULU) expects the net revenue for 2024 to exceed $10 billion, undergoing a growth of between 11%-12%. 45 hedge funds hold stakes worth $10.62 billion in Lululemon as of Q2 2024.
While we acknowledge the potential of Lululemon (NASDAQ:LULU) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Read Next: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These 10 Stocks in June.
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