In this article, we will look at the 10 Best Clothing Stocks To Invest In Now.
Trump’s Proposed Tariffs: How Will They Affect Retailers?
While the inflation figures have come down a little, they are still sticky. More consumers, even at higher income levels, are gravitating towards discounters. The reason is simple: prices are still higher than what they used to be. On November 26, Dana Telsey of Telsey Advisory Group appeared on CNBC to discuss the potential implications of Trump’s proposed tariffs on consumer prices and margin challenges for retailers.
She said that if the tariffs do come to fruition, the apparel industry will certainly be impacted. It is estimated that up to $80 billion in consumer spending could be impacted, which would require a double-digit increase in prices for some of the apparel goods.
Trends in the Holiday Shopping Season
Retail stocks are taking center stage with holiday shopping kicking off. However, the consumer spending front presents a dichotomy. While one side shows healthy consumer spending, the other side presents stretched credit and consumer spending patterns showing an increasing inclination for discounts.
On November 28, John San Marco, Neuberger Berman portfolio manager, joined CNBC’s ‘Closing Bell Overtime’ to discuss the recent trends in the retail sector. Listing how this season is different from the past few years, he said that real wages have been positive for a while now, with significant cohorts of consumers holding balance sheets in pretty good shape, particularly homeowners. There hasn’t been a discretionary comeback yet. Without any significant market disruption, he believes the season will see the consumer behave in a healthier fashion moving forward.
A significant consideration in the current holiday shopping season is whether retail investors should be concerned about a dynamic where some retailers bring inventory into the US ahead of the tariffs. Since this holiday season is expected to be relatively shorter, the retailers might have to discount their inventory to avoid having their warehouses too full.
Marco said that tactically figuring out the inventory inflow is complicated, made much more challenging by the volatility surrounding the election and the weather conditions. Some retailers may be able to capitalize on the situation’s unpredictability and buy stuff opportunistically. However, Marco is of the opinion that a premium on high-quality retailers that offer an unbeatable consumer value proposition is paramount.
Should Investors be Feeling Bullish About the Holiday Shopping Season?
On November 28, ‘Fast Money’ traders appeared on CNBC to discuss what to expect from retailers with the holiday season kicking off. Viewing the American retail sector through the lens of stocks soaring at all-time highs, the 2024 holiday season looks pretty positive.
However, there is another side to that coin as well, as some stocks are sinking to lows. Credit card debt is approaching $1.2 trillion, and delinquency rates are at a 13-year high. The situation thus presents a bifurcated retail environment. Despite this bleak side of the coin, people are feeling great about things at the present.
With a number of major events now in the past, people believe they are getting closure. The overall environment is simmering down, which is a tailwind for confidence in the analysts’ opinion. Agreeing with these points, Karen Finerman, Co-founder and CEO of Metropolitan Capital, said that markets and people both hate uncertainty. She believes that the market has risen a lot, and several other positive factors are making people feel better. Most retailers are positioned well on an inventory standpoint and can get good margins. She is thus comfortable with the current retail setup.
With these trends in view, let’s look at the 10 best clothing stocks to invest in now.
10 Best Clothing Stocks To Invest In Now
Our Methodology
For this article, we used the Finviz stock screener to identify around 15 clothing stocks and narrowed our list to 10 stocks with the most positive analyst upside from current levels. We also added the number of hedge fund holders for each stock, as of Q3 2024. The stocks are arranged in ascending order of their upside potential as of November 29, 2024.
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 Invest In Now
10. Zumiez, Inc. (NASDAQ:ZUMZ)
Analyst Upside: 11.16%
Number of Hedge Fund Holders: 15
Zumiez, Inc., is an apparel retailer that also sells footwear, accessories, and hard goods for young women and men. Its clothing and other items fit streetwear and action sports lifestyles. The company has more than 756 stores in the US, Canada, Europe, and Australia. Its brand portfolio includes Zumiez, Blue Tomato, and Fast Times.
The company’s brand portfolio and customer base are strong. Throughout 2024, Zumiez, Inc. has concentrated on reinvigorating its top-line sales through investments to continue gaining customer wins. Some of its initiatives to achieve this goal include infusing its product assortments with fresh offerings. Zumiez, Inc. launched more than 100 brands in 2022, more than 150 in 2023, and is on track to launch a similar number in 2024.
The continuous launch of these new brands gives the company a strategic advantage. Sales from its newly launched brands over the past couple of years account for a large portion of its current sales, reflecting their popularity among customers. It expects to continue this positive momentum by continuously expanding its private label share.
The company is also optimizing its store labor through various initiatives, including staffing model adjustments at lower-volume stores. It implemented structural changes to slash logistics and shipping costs company-wide, reduced discount selling compared to 2023’s elevated levels, and undertook other cost-saving initiatives throughout the organization.
Investors are thus bullish on the stock, as these adjustments to the company’s operating strategy, along with its strong balance sheet, position Zumiez, Inc. at a competitive position in the market and on a path to attaining its long-term goals.
9. Ross Stores, Inc. (NASDAQ:ROST)
Analyst Upside: 12.98%
Number of Hedge Fund Holders: 55
Ross Stores is an off-price apparel retailer that operates home fashion stores under two brands: Ross Dress for Less (Ross) and DD’s Discount. It operates over 1,764 Ross store locations in 43 US states, the District of Columbia, and Guam. The company also has more than 345 DD’s Discounts stores across 22 US states. Customers can find discounted in-season designer and name-brand apparel at the company’s stores, along with footwear, accessories, and home fashion. These discounts typically vary from 20% to 60% compared to department and specialty store regular prices, giving the company a competitive market edge.
With consumers looking for discounts and deals instead of giving in to brand loyalty in the current retail environment, investors are bullish on the stock. Ross Store, Inc. undertook an expansion program for 2024, completing it during fiscal Q3 2024 with the addition of 43 new Ross and four DD’s Discount stores. It added a total of 89 locations for the year, comprising of 75 Ross and 14 DD’s Discount stores. The company has plans to relocate or close seven locations in fiscal Q4 2024, and expects to end 2024 with 1,831 Ross stores and 354 DD’s Discount stores.
The company’s expansion strategy is working, as its total sales for fiscal Q3 2024 grew to $5.1 billion, up from $4.9 billion in the prior year. However, its fiscal Q3 2024 sales slowed compared to the solid gains it reported in the first half of 2024. This softness was primarily attributed to a combination of severe weather from Hurricane Hilton and Lane during the quarter, along with unseasonably warm temperatures. However, Ross Stores, Inc. is working to reverse the effects of these short-term headwinds by focusing on its merchandising initiatives. Ross Stores, Inc. ranks ninth on our list of the 10 best clothing stocks to invest in now.
In its fourth-quarter 2023 investor letter, TimesSquare Capital Management mentioned Ross Stores, Inc. (NASDAQ:ROST):
“In Consumer-oriented sectors, we lean towards value-oriented or specialty retailers, franchise models, as well as premium brands. Also gaining 23% over the quarter was Ross Stores, Inc. (NASDAQ:ROST), an off-price retailer featuring apparel and home fashions. Third-quarter results were solid as sales comparisons accelerated with higher levels of customer traffic across geographies. Management raised full-year guidance. We added to the position given our increased conviction at the start of the quarter.”
8. Burlington Stores, Inc. (NYSE:BURL)
Analyst Upside: 15.48%
Number of Hedge Fund Holders: 51
Burlington Stores, Inc. is an off-price retailer of branded apparel. It also sells accessories, footwear, and home merchandise for relatively lower prices. Its clothing section offers an elaborate array of fashion-focused, in-season merchandise, including women’s and men’s ready-to-wear apparel, youth apparel, baby clothing, coats, and more. The company operates more than 1007 stores, primarily under the brand name Burlington Stores.
The company is working on its new store opening program, which has been the primary driver of growth in its fiscal Q3 2024 earnings. Total sales for the company grew by 11% in fiscal Q3 2024, on top of 12% sales growth last year. It closed 15 stores, and is on the path to end 2024 with 101 net new stores.
However, the company’s comparable sales trend in fiscal Q3 2024 was significantly impacted by unseasonably warmer temperatures compared to last year. While its back-to-school season performance was positive, the sales trend dropped from mid-September onwards. If considered without the impact of the warm temperature, Burlington Stores, Inc. reported a healthy underlying comparable store sales growth.
Burlington Stores, Inc. has a conservative plan: it did not overreact to its strong back-to-school selling and managed to keep tight control over its liquidity and receipts. It thus reacted quickly to the warmer temperature headwinds, reflecting the company’s strong operational model. It expects to regain its positive sales growth with the coming of colder winter days and the holiday season in fiscal Q4 2024.
7. American Eagle Outfitters, Inc. (NYSE:AEO)
Analyst Upside: 21.10%
Number of Hedge Fund Holders: 31
American Eagle Outfitters, Inc. is a global specialty retailer that offers clothing, accessories, and personal care products. Its brand portfolio includes American Eagle and Aerie brands. American Eagle operates as a jeans and apparel brand, while Aerie offers lifestyle items such as apparel, intimates, activewear, and swim collections.
The company operates stores in the US, Canada, Hong Kong, and Mexico, and has license agreements with third parties to operate stores throughout Asia, Latin America, Europe, and the Middle East. American Eagle Outfitters, Inc. also operates Todd Snyder New York, a premium menswear brand.
American Eagle Outfitters, Inc. is continuously executing its strategic plans for the year, powering profitable growth, strengthening its operating capabilities, and driving shareholder value. It holds the ability to track and pivot into emerging trends and categories, positioning itself as one of the top jeans line for its targeted core customer aged 15 to 25. The company’s targeted brand strategies are resulting in a positive growth momentum across all its brands. American Eagle Outfitters is on the path to deliver value for customers in the coming seasons.
The company is offering trend rate collections and new marketing initiatives as part of its brand strategies to continue delivering strong results. Much of its brand growth was attributed to staying disciplined on inventory and chasing into fan favorites profitably, contributing to higher merchandise margins.
It is also continuing its core focus on expense discipline across the organization. In addition, its focus on greater efficiencies is yielding resulting, driving shareholder value. The stock ranks seventh on our list of the best clothing stocks to invest in now.
6. The Gap, Inc. (NYSE:GAP)
Analyst Upside: 21.80%
Number of Hedge Fund Holders: 39
The Gap, Inc. is a specialty apparel company in the US that offers apparel, accessories, and personal care products for women, men, and children. The company’s brand portfolio includes Old Navy, Gap, Banana Republic, and Athleta brands. The Gap brand offers adult apparel and accessories, Gap Maternity, GapKids, babyGap, GapBody, and GapFit collections. Banana Republic is a lifestyle retailer that offers womenswear, menswear, and home designs.
The company’s net sales grew for the fourth consecutive quarter in fiscal Q3 2024. It also attained an expanded gross margin and delivered its highest Q3 operating margin in seven years. The company also gained market share for the seventh consecutive quarter. This growth is attributed to the execution of The Gap, Inc.’s strategic priorities, notably its discipline and rigor in implementing its brand reinvigoration playbook.
The Gap, Inc.’s campaigns and collaborations are attracting a new generation to the company while simultaneously reinforcing the brand for its existing customers. It executed the Get Loose campaign in fiscal Q3 2024, which featured Troye Sivan and was rooted in Denim. The campaign was amplified by the relevant storytelling around the Loose Trend, earning the company a share increase in Denim with positive customer feedback on both the communications and the product. It takes the sixth spot on our list of the 10 best clothing stocks to invest in now.
5. Destination XL Group, Inc. (NASDAQ:DXLG)
Analyst Upside: 27.66%
Number of Hedge Fund Holders: 13
Destination XL Group, Inc. is a specialty apparel retailer that offers clothing options for big and tall men. It operates under several trade names in the US, including Destination XL, DXL, DXL Men’s Apparel, Casual Male XL, DXL outlets, and more. The company operates around 232 DXL retail stores, 15 DXL outlet stores, 17 Casual Male XL retail stores, 19 Casual Male XL stores, and a digital business.
These trade names offer an elaborate array of merchandise to fit a variety of men’s lifestyles, from casual to business and young to mature. The retail offerings carry moderate-priced national brands and the company’s own brands of dress wear and casual sportswear.
Destination XL Group’s business was affected in fiscal Q3 2024 due to consumer spending headwinds, resulting in lower online conversion and lower traffic to the company’s stores. The trends showed that buying clothing was not a priority for the big and tall consumer in fiscal Q3 2024, with consumers gravitating towards select promotions and lower-priced goods. The company’s fiscal Q3 2024 results thus reflect a continued shift towards value-driven and affordable options.
Despite the weak sales demand, Destination XL Group’s clearance penetration stands at 9.2%, which is in line with its long-term target of 10% and slightly lower than 9.7% of fiscal Q3 2023. Since the company has struggled to compete with some national brands, it has introduced a new price match guarantee program to ensure its prices remain competitive with the richer promotions and discounts its competitors offer.
The company is also focusing on its store expansion strategy, opening two more stores in fiscal Q3 2024 in Arizona and Texas. These openings brought the company up to seven new stores since the beginning of last year, with four more set to be opened by the end of fiscal 2024.
The primary objective of this store expansion strategy is to address the ease of access to Destination XL stores for consumers. 44% of the company’s polled consumers don’t shop there regularly because Destination XL stores do not exist near them, while 35% do not shop because of a lack of a company store conveniently close by. Destination XL Group, Inc. is thus endeavoring to remedy this problem through its strategic new store openings.
4. Abercrombie & Fitch Co. (NYSE:ANF)
Analyst Upside: 27.89%
Number of Hedge Fund Holders: 51
Abercrombie & Fitch Co. is a global omnichannel retailer that offers an assortment of apparel, personal care products, and accessories for women, men, and kids. Its brand portfolio includes Abercrombie brands, which includes Abercrombie & Fitch and abercrombie kids, and Hollister brands, including Hollister and Gilly Hicks.
The company delivered net sales of $1.2 billion in fiscal Q3 2024, up 14% over fiscal Q3 2023. It also delivered strong comparable sales of 16%. This growth was attributed to the company’s strong playbook, which is delivering value for both new and existing customers. Abercrombie & Fitch is seeing an increasing number of customers responding to its product voice and experience, boosting sales.
The company’s solid brand health was reflected across all its regions, with the EMEA, Americas, and APAC all growing double digits in fiscal Q3 2024. The Americas grew by 14%, delivering the sixth consecutive quarter of double-digital sales growth in the region. APAC and EMEA grew by 32% and 15%, respectively.
The Abercrombie brands grew by 15% in fiscal Q3 2024 on top of the 30% growth in fiscal Q3 2023, attaining a third-quarter record for brand net sales. Jeans, dresses, sweaters, and fleece were the primary categories behind this growth, with category balance continuing across genders for the company.
Abercrombie & Fitch is focusing on its store expansion strategy to continue this positive momentum. It is planning to open around 40 new stores for Abercrombie brands in 2024, allowing customers convenience in the shopping season.
Carillon Eagle Small Cap Growth Fund stated the following regarding Abercrombie & Fitch Co. (NYSE:ANF) in its Q3 2024 investor letter:
“Abercrombie & Fitch Co. (NYSE:ANF) is a global multi-brand omnichannel specialty retailer of apparel, personal care products, and accessories for men, women, and kids. The stock lagged during the period despite reporting strong quarterly results and lifting forward guidance. We believe the performance is more a result of elevated investor expectations than any weakening of the underlying fundamentals, which we believe continue to remain strong.”
3. Land’s End, Inc. (NASDAQ:LE)
Analyst Upside: 29.53%
Number of Hedge Fund Holders: 9
Land’s End, Inc. is a digital solution-based retailer that sells apparel, swimwear, and outerwear. Its product offerings also include accessories, footwear, home products, and uniforms. The company has five distribution channels, including US eCommerce, Outfitters, International, Third Party, and Retail.
The company is executing its solutions-based strategy and is focusing on innovation to evolve its brands and assortment. This has allowed it to attract new customers. Land’s End, Inc. is also improving its inventory position and supply chain. The company is continually prioritizing newness and speed-to-market in its assortments, and is taking a deliberate approach to its offerings. Customers are increasingly resonating with the company’s brands as it is staying on top of trends and introducing fresh styles, colors, and fabrics that fit the moment and are consistent with its assortment.
In addition, Land’s End, Inc. is reinvigorating its digital channels. The company’s marketing investments are revamping the image of its brands, driving more traffic to its channels. This is translating to greater new customer conversion and more full price sales. All of these initiatives reflect the company’s potential for sustained long-term growth.
2. J. Jill, Inc. (NYSE:JILL)
Analyst Upside: 40.85%
Number of Hedge Fund Holders: 15
J. Jill, Inc. is a national lifestyle brand that offers women’s apparel, footwear, and accessories. It operates through two operating segments: retail and direct channels. Apart from its core assortment, the company operates three sub-brands: Pure Jill, Fit, and Wearever. The company ranks second on our list of the 10 best clothing stocks to invest in now.
The company’s product offerings resonate with its target market, with its sweaters and core bottoms programs being particularly popular. Its cardigan assortment and more fashion-forward crochet and open stitch detailers sweaters are also key drivers of sales for the company. Since the company has a disciplined operating model, it takes appropriate action to periodically move products in season.
J. Jill, Inc. is building its brand awareness and customer file by evaluating its marketing plans and diversifying its channels. It has plans to invest appropriately in marketing, testing and learning various new ways to engage current customers and raise the profile of its brands to attract new customers. The company operates in a dynamic environment, and is leaning into the disciplines of its operating model to continue driving margin performance and generate strong cash flow.
1. Torrid Holdings, Inc. (NYSE:CURV)
Analyst Upside: 42.33%
Number of Hedge Fund Holders: 12
Torrid Holdings, Inc. is a direct-to-consumer brand of apparel, intimates, and accessories that operates in North America. It designs, develops, and merchandises almost all of its products in-house, and operates under the brand names CURV, Torrid Curve, Torrid, and Lovesick. The company is focused on fit, and offers apparel items across an elaborate assortment. It operates around 655 stores in the United States, Canada, and Puerto Rico.
Torrid Holdings, Inc. has several strategies in place for its business transformation. The first phase of its transformation focuses on driving operational excellence, and is almost complete. Phase 2 focuses on scaling its platform to gain additional wallet share, expand its product offerings, and build its active customer file while delivering solid top and bottom line growth.
The company has undertaken several initiatives in the past years, improving its operational execution, building talent, driving supply chain capabilities, realigning product sourcing, and optimizing inventory levels. Torrid Holdings, Inc. has also expanded its technical and digital capabilities and has enhanced its financial discipline. The company is working on building an operational foundation that accelerates it to the next phase of its strategy, which is product expansion and evolution. Investors are bullish on the stock as such initiatives position the company for long-term growth and success.
Overall, CURV ranks first among the 10 best clothing stocks to invest in now. While we acknowledge the potential of clothing stocks, 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 CURV but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
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