In this article we will look at the 11 Best Fashion Stocks To Buy Now.
Overview of the Global Fashion Industry
The global fashion industry is a force to reckon with as one of the largest industries across the globe. The global fashion retail market was worth $91.25 billion in 2023, as per a report by Zion Market Research. This market is anticipated to grow to $157.88 billion by 2032, at a compound annual growth rate of around 7.09% between 2024 and 2032.
According to the McKinsey report on The State of Fashion 2024, the fashion market in the US and Europe experienced slow growth in 2023. In comparison, China’s fashion market performed better in the first half of 2023 before gradually waning in the second half. The luxury segment, however, underwent considerable growth in the first half of 2024. But it, too, began to experience the effects of weaker demand in the second half of 2023.
According to McKinsey’s forecast, the global fashion industry is expected to undergo a top-line growth of between 2% and 4% in 2024. The luxury segment has a more optimistic outlook, with growth expectations reaching 3% to 5% globally.
However, with inflation consistently falling, the global fashion industry is expected to exceed expert estimates and make a solid comeback. The Federal Reserve also cut interest rates in September, its first cut since the COVID-19 pandemic, slashing half a percentage point off benchmark rates. These recent happenings are expected to positively impact the global fashion industry in general and the US fashion segment in particular, due to a potential increase in consumer spending.
The Global Fashion Industry: Potential Challenges and Future Outlook
However, despite the apparently optimistic landscape, the fashion industry is not immune to challenges. According to a survey by McKinsey & Company, 62% of executives cite geopolitical instability as the most prominent threat to fashion industry growth. In addition, around 55% of executives believe economic volatility is the largest hindrance to increased revenue. 51% consider inflation to be the primary cause behind this roadblock.
Expert opinion on the industry’s future outlook is also divided. While 37% of respondents believe the sector will likely stay the same, 38% expressed a pessimistic outlook, claiming that the industry will worsen with time. In contrast, 26% expressed hope and optimism, believing that the global fashion industry will likely come back. The survey also concluded that since cost-saving tactics across the industry have almost been exhausted, a more than 50% intent of raising prices stands.
With these trends in view, let’s look at the 11 best fashion stocks to buy now.
11 Best Fashion Stocks To Buy Now
Our Methodology
We first consulted stock screeners from Finviz and Yahoo Finance, along with online rankings, to create an initial list of 30 publicly traded fashion companies. From this list, we selected the 11 stocks with the highest number of hedge funds as of Q2 2024 and used that as our ranking metric.
Why are we interested in 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).
11 Best Fashion Stocks to Buy Now
11. American Eagle Outfitters, Inc. (NYSE:AEO)
American Eagle Outfitters (NYSE:AEO) is a global fashion retailer that offers clothing, accessories, and personal care products under two segments: American Eagle and Aerie brands. American Eagle is an American apparel and jeans brand, while Aerie is a lifestyle brand that offers apparel, intimates, activewear, and swim collections. Aerie also operates OFFLINE, which sells a complete collection of activewear and accessories.
American Eagle Outfitters (NYSE:AEO) sells its merchandise directly to consumers through its retail channel, including corporate-operated stores and concession-based shops within shops. It operates stores in Canada, the United States, Mexico, and Hong Kong. It also holds license agreements with third parties to operate American Eagle and Aerie in-store and online in marketplace businesses across the globe, including Asia (including India), Europe, Latin America, and the Middle East. In addition, the company also operates Todd Snyder New York, a premium menswear brand.
The company is experiencing strong growth and profitability across its key performance metrics. In Q2 2024, it delivered its sixth consecutive quarter of record revenue while also experiencing substantial growth in operating income. When considered with solid Q1 results, its Q2 2024 results highlight a profitable first half of 2024. American Eagle Outfitters’ (NYSE:AEO) consistent progress across strategic priorities aligns with its multi-year plan.
Overall, the company is working on three pillars: amplification of its brands, optimization of its operations, and execution of financial discipline. Focus on these pillars is returning strong financials to the company. Revenue for Q2 reached $1.3 billion, making a new record. It is also growing its market share and gaining momentum along with a number of its focus categories. It has applied its new lived-in store design to around 30 locations, with positive results flowing in from each. The better performance of the remodeled stores shows that the company’s strategies are working.
10. Ralph Lauren Corp. (NYSE:RL)
Ralph Lauren (NYSE:RL) is a globally famous fashion retailer that specializes in designing, marketing, and selling luxury lifestyle products, including apparel, footwear, accessories, fragrances, home, and hospitality. It operates in North America, Europe, and Asia with a brand portfolio spanning Ralph Lauren, Polo Ralph Lauren, Ralph Lauren Collection, Lauren Ralph Lauren, Ralph Lauren Purple Label, Double RL, and others. Apart from manufacturing luxury items for men, women, and children, the company’s hospitality segment includes restaurants like New York City’s The Polo Bar and Chicago’s RL Restaurant.
Ralph Lauren (NYSE:RL) holds a significant competitive advantage due to its market standing. The company’s desirability and power are continuously increasing, demonstrating its ability to resonate across geographies, cultures, and generations. Other key drivers of growth are its organizational agility and diversified growth engines, which highlight the efficiency of its long-term growth strategies.
The company continuously invests in its strategic priorities to maintain its global standing. These key areas include marketing, digital capabilities, and targeted ecosystem expansion across key cities. It is on the oath to drive long-term sustainable growth and value creation beyond its initial three-year plan, fueled by increased efficiencies and operation discipline.
The success of these strategies can be corroborated by the company’s strong financials. Q1 fiscal 2025 saw continued growth across its three strategic pillars: elevation of its lifestyle brand, winning key cities via its consumer ecosystem, and driving the core while expanding for more. As part of efforts to revamp its lifestyle brand, Ralph Lauren (NYSE:RL) has undertaken activities in London, Milan, New York, and across China, increasing its social media following in the process.
It has also managed campaigns across key demographics and geographics, such as the women’s collection runway show in New York City in April and the Only Polo campaign. In addition, its local activities spanned SoHo in New York, Dubai, Miami’s Design District, L.A.’s Sunset Boulevard, Roppongi in Tokyo, and Seoul. These efforts are helping the company leverage longer-term brand building while focusing on new customer acquisition and high-quality sales.
Ralph Lauren (NYSE:RL) is also working to boost its social media standing. Its followers grew by low teens to last year, crossing the 60 million mark let by Instagram, Threads, TikTok, Line, and Douyin. It ranks tenth on our list of the 11 best fashion stocks to buy now.
9. The Gap, Inc (NYSE:GAP)
Gap (NYSE:GAP) is a specialty apparel company that offers apparel, accessories, and personal care products for women, men, and children under a portfolio of brands, including Gap, Old Navy, Banana Republic, and Athleta. This omnichannel retailer sells its merchandise to customers both online and in-store through corporate-operated and franchise stores, websites, and third-party arrangements. The company offers enhanced mobile-enabled experiences to streamline online shopping for its customers across its brand collection. Gap (NYSE:GAP) offers adult apparel and accessories, GapFit, Gap Maternity, GapBody, and babyGap collections. In contrast, Banana Republic is a premium lifestyle retailer that offers versatile and high-quality womenswear, menswear, and home design.
Gap’s (NYSE:GAP) recent Q2 2024 quarter delivered strong results, exceeding analyst expectations. It gained market share for the sixth consecutive quarter, giving it a stronger position across key metrics such as net sales, cash position, and margins. It is undertaking continuous initiatives to reinvigorate its brand portfolio and unlock the company’s full potential, which highlights the solid profitability model it is running on.
Net sales increased 5% in Q2, with comps growing by 3%. The company’s primary focus is continuing this profitability trajectory by building stronger brand identities through trend-right products, increasing cultural relevance, and engaging in an engaging omnichannel experience.
To do so, it has launched several campaigns, including the Get Loose campaign featuring Troy Sevan and Dance Company CDK. This campaign solidified Gap’s (NYSE:GAP) standing as the ultimate destination for the baggy and oversized trend, giving it a competitive edge. It also built on momentum and share gains in the Kids segment, launching one of its strongest back-to-school campaigns by adopting a new media mix model and boosting kid demand via mom-approved messaging. Such collaborations continually amplify the company’s market standing, setting it up for long-term success.
Gap (NYSE:GAP) began working with Omnicom Group Inc. (NYSE:OMC), its new media partner, in Q3 to modernize its capabilities. It is shifting from a promotional media-focused company focused on performance to a full-funnel strategy to increase the effectiveness of its marketing spend. It prioritizes leveraging data and optimization to a greater extent and implementing best execution practices to become more consumer-led. Although the initiative is in its early stages, it is expected to significantly improve the economics of its marketing spend and alter its brand standing.
8. Crocs, Inc. (NASDAQ:CROX)
No. of Hedge Funds as of Q2 2024: 40
Crocs (NASDAQ:CROX) specializes in designing, developing, marketing, distributing, and selling casual lifestyle footwear and accessories for women, men, and children. It operates under the Crocs Brand and the HEYDUDE Brand segments. The Crocs Brand segment offers a collection of Croslite material, a molded footwear technology formulated to create odor-resistant, comfortable, soft, lightweight, and non-marketing footwear. The HEYDUDE Brand, in contrast, operates in more than 80 countries, and offers a collection with a versatile silhouette.
It functions through two distribution channels: direct-to-consumer and wholesale. The direct-to-consumer channel includes company-operated e-commerce sites, retail stores, and third-party marketplaces. The wholesale channels cover international and domestic mon-branded partner stores, multi-branded retailers, distributors, and e-tailers.
Crocs (NASDAQ:CROX) is running on solid fundamentals. It reported revenue of more than $1.1 billion in Q2 2024, making it the highest quarterly achievement in the company’s history. Its strong performance resulted in a record free cash flow, allowing the company to pay down $200 million in debt. It also repurchased $175 worth of its common stock, highlighting a solid profitability model for the company.
The company is undertaking enterprise initiatives to continue this growth trajectory, focusing on three primary levers to support long-term and durable growth. These include igniting icons across its brands to boost awareness and global relevance for new and existing customers, undertaking strategic investment behind talent to drive market share gains across its Tier 1 markets, and methodically diversifying its product range and usage occasions to attract new customers to its brands.
Crocs (NASDAQ:CROX) recorded broad-based strength across different geographies through initiatives led in the Tier 1 markets. North America outperformed expectations in the quarter, gaining market gain with a revenue growth of 3% as compared to last year in a relatively flat market. This growth was primarily driven by solid DTC channel growth and improved advanced demand from retail partners. International revenue also grew by 22% compared to last year, boosted by significant growth in China and Australia. China grew approximately 70% on top of last year’s triple-digital growth. While Chinese customers appear to become cautious in spending in other segments, the opposite is happening for Crocs (NASDAQ:CROX), giving the company a strong competitive advantage through its accessible and personalized brand position.
Choice Equities Capital Management stated the following regarding Crocs, Inc. (NASDAQ:CROX) in its first quarter 2024 investor letter:
“Shares of Crocs, Inc. (NASDAQ:CROX) and Shake Shack, Inc. (SHAK) appreciated meaningfully as recent earnings results were positively viewed and some bear point debates began to move into the rearview mirror. CROX – In the case of Croc’s, the stock continues to trade at an attractive high-single-digit multiple of earnings. Importantly, the company is making significant progress in turning the tide for HeyDude after sales of the brand hit an air pocket due to higher-than-wanted inventories in the wholesale channel last year. Inventory levels have improved, enabling average selling prices to move higher, while the new HeyDude distribution center in Las Vegas has also now become operational. Along with an expansion of HeyDude-specific outlet stores, which are very high margin and drive nearly a third of Crocs’ brand North American sales, it looks like the Croc’s playbook is nearly fully in place. And just last week, the company announced Terence Reilly would return to the company as president of the brand. Bringing Reilly back into the fold seems a very promising move. He deserves a great deal of credit for Croc’s resurgence, which he described as taking it “from meme to dream” when he was previously with the company as head of marketing from 2013 to 2020. He clearly seems to have a knack for creating buzz around a brand, given his recent success at Stanley, where he was CEO after driving sales of the famed “Stanley Cup” up ten-fold to $700M in just four years. (An insightful interview with him on his approach to marketing and management – and the back story on how Stanley went viral by giving away a car to a car collision survivor – can be found here.) It seems prospective marketing success can often be as hard to predict as it is important to a brand’s vitality. But here, it looks like Reilly is a proven winner. Might he again be able to create a sensation around a brand like HeyDude, one that has high affinity amongst existing customers yet still low-brand awareness more broadly? Given recent operational improvements, the brand seems well positioned to again focus on playing offense and improved brand performance may be right around the corner”.
7. Burlington Stores, Inc. (NYSE:BURL)
No. of Hedge Funds as of Q2 2024: 42
Burlington Stores (NYSE:BURL) is an off-price retailer selling branded apparel, accessories, footwear, and house merchandise at discounted prices every day. Its stores offer an elaborate collection of fashion-focused, in-season merchandise, including women’s ready-to-wear apparel, youth apparel, menswear, beauty, footwear, accessories, coats, and others.
The company operates through five distribution centers, two of which are located on the East Coast in New Jersey and three on the West Coast in California. These five centers occupy an aggregate of around 4.10 million square feet and offer processing, storage, and shipping capabilities. The company also has third-party arrangements for the use of pool point facilities. It operates more than 1,000 stores.
Burlington Stores (NYSE:BURL) experienced a 13% total sales growth compared to a 9% sales growth in 2023. When considered on a compound basis, the company is now 24% bigger than two years ago, highlighting its solid expansion and growth trajectory. It opened 36 net new stores in Q2 2024, and relocated four of its older oversized locations. That brings the total number of new stores opened for the fiscal year-to-date to 50, along with 15 additional relocations. The company has plans to open 100 new stores and relocate 30 others for the year as a whole. It expects its new stores to run around $7 million in sales in their first full year, further solidifying the company’s market presence and boosting sales.
Total sales in Q2 2024 grew by 13% as compared to Q2 2023, with new stores being the primary driver of this growth. Comp sales growth is another key driver of top-line sales. Comp-store sales grew by 5%, surpassing guidance of flat to 2%. The company also expanded its operating margin and gross margin, driven by lower markdowns and faster inventory turns. In addition, its faster-than-expected supply chain efficiency initiatives also drove 60 basis points of leverage in the supply chain. Burlington Stores is now focusing its attention on delivering greater value across income bands and demographics.
42 hedge funds hold stakes in the stock, with Citadel Investment Group holding the highest stakes worth $284.22 million as of Q2 2024. It takes the seventh spot on our list of the best fashion stocks.
ClearBridge SMID Cap Growth Strategy stated the following regarding Burlington Stores, Inc. (NYSE:BURL) in its fourth quarter 2023 investor letter:
“Interest rate relief also had a strong impact on more cyclical companies and those with ties to general consumer spending. For example, consumer discretionary holdings and discount retailers Burlington Stores, Inc. (NYSE:BURL) and Five Below both rose during the quarter thanks to improving outlooks. Five Below, a specialty value retailer for products including apparel, accessories, novelty items, décor, cosmetics and accent furniture, rebounded from being one of the third quarter’s worst-performing stocks. We believe both Five Below and Burlington are particularly well-positioned for an economic environment where consumer budgets are being tightened but demand for discretionary goods remains stable.”
6. Macy’s, Inc. (NYSE:M)
No. of Hedge Funds as of Q2 2024: 44
Macy’s (NYSE:M) is an omni-channel retail company that operates department stores selling apparel, accessories, cosmetics, home furnishings, and other consumer goods. Its brand portfolio includes Macy’s, Bloomingdale’s, and Bluemercury. It operates stores in 43 states, the District of Columbia, and Puerto Rico, and Guam. The company conducts its operations through Macy’s, Macy’s small format, Macy’s Backstage, Bloomingdale’s, Bloomingdale’s The Outlet, Bluemercury, and Bloomie’s.
It also holds a license agreement with Al Tayer Insignia to operate Bloomingdale’s in the United Arab Emirates and Kuwait. Macy’s principal private label brands include Alfani, Bar III, And Now This, Belgique, Aqua, Club Room, Charter Club, Family PJ’s, Epic Threads, Holiday Lane, Giani Bernini, Hotel Collection, Home Design, Ideology, Hudson Park, and others.
Macy’s (NYSE:M) is working to maximize profitability by closing down stores across the US with inadequate sales and opening small-format stores in their place. It plans to open around 30 new small-format stores through 2025, and recently hired more than 31,500 full and part-time employees for the upcoming holiday season.
To counter the effects of the change in consumer behavior on its sales, the company shifted its marketing calendar to balance value and fashion while aligning its assortments. It improved its promotions to deliver more personalized and targeted messages across brands and categories, invested in areas with proven product strength, and slashed its exposure to areas of softer demand. Such initiatives shifted the course of Macy’s (NYSE:M) business late in Q2, highlighting the resilience of the company’s operation model.
The company is also targeting weaknesses in men’s apparel, home, and handbags. In men’s clothing, it is focusing its attention on the contemporary, which it claims to be in a bright spot for growth. Macy’s (NYSE:M) also launched a new private brand that specifically targets customers under 40 in an attempt to elevate consumer engagement. It is also introducing diversity in its handbag collection to grow its portfolio.
As of Q2 2024, 44 hedge funds hold stakes in Macy’s (NYSE:M), with Arrowstreet Capital being the most prominent shareholder with 9.5 million shares. It ranks sixth on our list of the top fashion stocks to buy.
5. Skechers USA, Inc. (NYSE:SKX)
No. of Hedge Funds as of Q2 2024: 45
Skechers (NYSE:SKX) designs, manufactures, and markets a wide range of apparel, footwear, and accessories for women, men, and children. It operates through two segments: Direct-to-Consumer and Wholesale. The Direct-to-Consumer segment encompasses product sales made directly by the company to consumers via a combination of channels. These include company-owned e-commerce sites, Skechers-branded stores, digital platforms, and third-party marketplaces.
The Wholesale segment covers sales to a network of partners. These include family shoe stores, specialty athletic and sporting goods retailers, Skechers-branded stores operated by licensees and third-party franchises, big box club stores, department stores, and distributors in particular international markets.
The company’s lifestyle offering manufactures and markets comfort technologies, including Skechers Ai-Cooled Memory Foam, Skechers Arch Fit, Skechers Hands-Free Slip-ins, and others. Sales in Q2 2024 grew by 7.2% to $2.16 billion as compared to last year, making a sales record for the period. This growth translates to an increase of $145 million. It also announced a new $1 billion share repurchase plan, significantly enhancing and replacing its current program. Skechers (NYSE:SKX) boasts a solid operation model, as it was able to drive growth by overruling hurdles such as supply chain disruptions affecting shipments to Europe, a price-driven 618 shopping event in China, and foreign currency headwinds.
Another key reason behind its growth is the strong global demand for the company’s innovative and comfortable products. These products resonated with customers of all ages and interests, driving growth in all segments and regions. The company partnered with industry technology leaders like Goodyear to further diversify and innovate its product offering, and announced a new partnership with John Deere along with a new Skechers football campaign with a team of athletes. It is driving purchase intent and brand awareness by increasing its global product offering. In addition, Skechers (NYSE:SKX) is also focusing on building efficiencies within our business to scale profitable growth.
45 hedge funds hold stakes in the stock, with Anomaly Capital Management holding the highest stake, worth $199.33 million, as of Q2 2024. It ranks fifth on our list of the 11 best fashion stocks to buy now.
Meridian Growth Fund made the following comment about Skechers U.S.A., Inc. (NYSE:SKX) in its Q4 2022 investor letter:
“Skechers U.S.A., Inc. (NYSE:SKX), designs and sells lifestyle and athletic footwear. It is the third-largest footwear company in the U.S. and has a strong and growing international presence. In our view, the market does not fully recognize the growth opportunity represented by Skechers’ international business. During the quarter, the company reported strong gains worldwide, led by a 48% increase in sales in the EMEA region and a 9% rise in the APAC region despite COVID-related slowdowns, as well as 16% growth in the Americas, powered by healthy demand in the U.S. and Canada. The company is still contending with some expense issues, primarily related to ongoing supply chain and distribution channel challenges, but investors are increasingly recognizing management’s success at managing through the issues and setting the company up for potentially strong cash flow growth in 2023. Amid the growing optimism, we maintained our position in the stock.”
4. Lululemon Athletica, Inc. (NASDAQ:LULU)
No. of Hedge Funds as of Q2 2024: 45
Lululemon (NASDAQ:LULU) designs, distributes, and sells athletic apparel, footwear, and accessories. Its apparel segment offers shirts, shorts, tops, jackets, and other necessary items for a healthy lifestyle and athletic activities, such as running, training, yoga, and others. Its collection also includes fitness-inspired accessories. The company’s segments are divided into company-operated stores and direct-to-consumer segments.
Lululemon’s (NASDAQ:LULU) technical athletic footwear, apparel, and accessories are sold through different channels, including direct-to-consumer via e-commerce, company-operated stores, outlets, sales to wholesale accounts, recommence, license and supply arrangements, and sales from temporary locations. It also operates Lululemon Studio, which offers in-home connected fitness and related content subscriptions. Lululemon (NASDAQ:LULU) manages stores in the United States, Canada, Australia, the United Kingdom, Germany, South Korea, and others.
The company’s significant market popularity gives it a competitive edge. By merchandise category, men’s increased by 11%, women’s by 6%, and accessories by 7% in Q2 2024. The company also repurchased $584 million of its stock in Q2, bringing its total to $1.2 billion year-to-date. This highlights the company’s continued confidence in its business.
Lululemon (NASDAQ:LULU) saw strength in its regional performance, with international markets showing high consumer engagement with the brand. Its established business outside North America remains one of its largest growth opportunities. It is on track to quadruple its international revenue from 2021 levels by the end of 2026. Total international revenue in the quarter increased by 29%, or 31% in constant currency, highlighting the company’s robust profitability model.
The company is fast-tracking a number of new styles within tops, performance shorts, and tracksuits for 2025. The company exhibits confidence in its new strategies and is on track to return to its historical levels of newness before Spring 2025. The stock sports a consensus Buy rating among analysts, and its median price target of $262.61 implies an upside of 23.38% from current levels.
3. Abercrombie & Fitch Co. (NYSE:ANF)
No. of Hedge Funds as of Q2 2024: 48
Abercrombie & Fitch (NYSE:ANF) is a global, digitally-led omnichannel retailer offering personal care products, apparel, and accessories for women, men, and kids. These products are primarily sold through company-owned stores, digital channels, and a number of third-party arrangements. It operates through a portfolio of brands, such as Abercrombie and Fitch, Abercrombie Kids, and Hollister brands, which include Hollister and Gilly Hicks.
The company operates throughout the Americas, APAC, and EMEA. The APAC segment operates in the Asia-Pacific region, including Oceania and Asia. The EMEA segment operates in Europe, the Middle East, and Africa. Abercrombie &Fitch (NYSE:ANF) operates 40 international franchise stores across its brands, primarily in the EMEA region and the Americas.
The company runs on strong financials. Net sales in Q2 2024 grew by 21% to $1.1 billion, with an operating margin of 15.5%. In addition, Q2 2024 marked the seventh consecutive quarter of net sales growth in an uncertain, dynamic consumer environment. This highlights the underlying strength of the company’s brands and its strong global consumer base. Bolstered by a culture of financial discipline and an agile supply chain, the company is positioned to deliver its goals across a variety of macro environments.
The company’s sales growth was driven by expansion across brands, regions, and genders. Consistent with the previous five quarters, it saw growth in both units and AUR, highlighting the strong model it is functioning on. Abercrombie & Fitch (NYSE:ANF) is delivering lifestyle assortments with growing relevance to local customers, expanding its consumer base, and developing across key categories. It delivered operating leverage in Q2, funding significant marketing, technology, digital, and people investments to strengthen its long-term goals. These efforts led to an operating income of $176 million for Q2, nearly double the results from Q2 2023.
Abercrombie & Fitch (NYSE:ANF) has plans to amplify its brands, opening new store locations, refreshing store experiences, and investing in incremental marketing to boost engagement. It is also reintroducing its Hollister brands to expand its target audience. The elevated marketing investment spans social and digital channels, along with authentic, real-life activations and experiences. It ranks third on our list of the best fashion stocks.
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.”
2. Ross Stores, Inc. (NASDAQ:ROST)
No. of Hedge Funds as of Q2 2024: 53
Ross Stores Inc. (NASDAQ:ROST) is a home fashion and off-price apparel chain in the US. It offers name-brand and designer in-season apparel, footwear, accessories, and home fashion for a broad audience, with 20% to 60% discounts compared to regular department and specialty stores. The company operates around 1,764 locations in 43 states across the US, Guam, and the District of Columbia.
It also operates around 345 dd’s DISCOUNTS® stores in 22 states in the US, bringing the total number of Ross stores and dd’s DISCOUNTS® stores to more than 2,109. In June and July, the company announced the opening of 21 Ross stores and three dd’s DISCOUNTS® stores across 17 states in the US. This expansion is part of the company’s plans to open around 90 new stores in fiscal 2024, divided into 75 Ross and 15 dd’s DISCOUNTS® stores.
The company’s solid and profitable model is appealing to investors. Its sales increased for the 2024 year-to-date period, going from $9.4 billion in 2023 to $10.1 billion in 2024. Comparable store sales also grew by 4% in Q2 2024, primarily because of increased basket size and improved traffic. Apart from rising sales, Ross’s improved profitability also benefited from lower incentive and distribution costs. Ross Stores Inc. (NASDAQ:ROST) is taking steps to continue these improving trends by adjusting its assortments in its newer markets to resonate with a wider customer base.
Ross Stores Inc. (NASDAQ:ROST) plans to open 47 new stores in Q3, including 43 Ross and 4 dd’s DISCOUNTS® stores. Its continuous expansion strategy gives it a major competitive edge in the industry. As of Q2 2024, 53 hedge funds hold stakes in the stock, with D E Shaw holding the largest stake worth $420.48 million. It takes the second spot on our list of the best fashion stocks to buy now.
TimesSquare Capital U.S. Mid Cap Growth Strategy stated the following regarding Ross Stores, Inc. (NASDAQ:ROST) in its fourth quarter 2023 investor letter:
“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.”
1. Nike, Inc. (NYSE:NKE)
No. of Hedge Funds as of Q2 2024: 66
Nike (NYSE:NKE) is a luxury retailer specializing in the design, marketing, and distribution of athletic clothing, footwear, accessories, equipment, and services for fitness activities. It sells its athletic and fitness collection under several brands, including NIKE, Jordan Brand, and Converse. In addition, it specializes in casual apparel, footwear, and accessories, distributing and licensing them under the All-Star, Chuck Taylor, Star Chevron, One Star, and Jack Purcell trademarks.
Nike (NYSE:NKE) is leveraging its previously existing Express Lane to build new ways of working across the entire product development process. By calling it the Speed Lane, the company is integrating it as a company-wide effort to use its resources to accelerate design, use advanced digital tools to expedite development, and leverage key manufacturing partners to quicken product production and testing. Speed Lane is expected to bring out innovations in the second half of the fiscal year and release several new fitness and lifestyle franchises, widening its consumer base.
Nike’s (NYSE:NKE) revenue grew by around 1% in fiscal 2024, with EPS increasing 15%. The company has undertaken several strategic shifts in the past year, including organization and leadership changes, capacity building for investment in consumer-facing activities, and starting a multi-year innovation cycle. But most of all, Nike’s (NYSE:NKE) sharp focus is on sports. It is scaling innovation and newness, fielding brand distinction to build momentum in its product portfolio.
Nike (NYSE:NKE) also has plans to reinvest around $1 billion in consumer-facing activities in fiscal 2025. The investment is anticipated to expedite the company’s strong growth by increasing resources in merchandising, design, and product creation for its key sports dimensions. It will also speed up the company’s running in key cities, elevate its brand distinction in physical retail, and drive bolder, larger brand campaigns, starting from the Paris Olympics and EC ’24.
Mar Vista Focus strategy stated the following regarding NIKE, Inc. (NYSE:NKE) in its first quarter 2024 investor letter:
“NIKE, Inc.’s (NYSE:NKE) recent earnings report was a mixed bag. While revenue met expectations and earnings exceeded them, the stock price dipped due to management’s cautious outlook for fiscal 2025. The company is currently undergoing a period of internal restructuring and product line adjustments, which is expected to lead to flat revenue growth in the first half of the coming fiscal year. However, this transition aims to position Nike for long-term success.
Our conviction in Nike remains high, and we expect it to emerge stronger and more competitive once the restructuring is complete despite the softer revenue forecast. Nike still anticipates earnings will grow around 10% in calendar 2024 and will accelerate to 15% in 2025 as execution normalizes.”
Overall, NKE ranks first among the 11 best fashion stocks to buy now. While we acknowledge the potential of fashion companies, 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 NKE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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