In this article, we will look at the 12 Best Apparel Stocks to Invest In.
Consumer Spending and Weather: What’s the Connection?
On February 25, Matt Boss, JPMorgan retail analyst, appeared on CNBC’s ‘Closing Bell’ to discuss the retail trade. He said the market has seen the worst start to spring in around 30 years. From a weather perspective, there have been significant store closures as every part of the country, excluding the southwest, has been clobbered by unseasonable weather.
On top of it, the country has seen 30% more snow, which has pressured seasonal sales. The unseasonable climate has thus created an unfavorable environment. States in the southwest, including California, which have had normal weather, have undergone a 0% change in consumer spending. In fact, consumer spending in states like California, Nevada, and Arizona was up 5%, exactly the same as the rate in November and December.
READ ALSO: 10 Best Vegan Stocks to Buy According to Analysts and 10 Best Discount Store Stocks to Invest In.
The Condition of the American Market and Consumer
Further talking about the conditions of the market and consumers, Boss was of the opinion that a selective recession is materializing. The real force driving consumer spending is the 50% of the economy driven by higher-income consumers. He said that $60 trillion in wealth creation since 2019 is the number to be noticed here. At the low end, the consumer continues to be pressured. However, in retail, this trend means that those offering value continue to win, which is usually the case for retailers catering to value and convenience simultaneously. He said that retailers offering products that are better than a year ago and not compromising on value at the same time make up the equation on the basis of which the market is seeing real winners and losers. He also believed that consumer resilience presents a buying opportunity in the retail sector weakness.
On March 3, Chris Horvers, JPMorgan head of broadlines/hardlines retail, joined CNBC’s ‘The Exchange’ to discuss the retail trade and the weakening consumer. He said that over the past three years, the market has consumers seeking the cheapest prices, particularly in the food market, which is proving to be a tailwind for discount retailers. Thus, he thinks it would be difficult to pass along tariffs, especially in the discretionary categories. The retailers would have to eat a little bit, and so would the manufacturers. However, there is also likely to be an elasticity impact.
We discussed the potential impact of Trump’s tariffs on retail stocks in a recently published article on 12 Cheap Retail Stocks to Buy According to Hedge Funds. Here is an excerpt from the article:
“The Trump administration proposed 25% tariffs on goods imported from Canada and Mexico and 10% tariffs on Chinese-imported goods. Analysts believe these tariffs will affect retail stocks and the goods manufactured in the tariffed countries, at least theoretically. While tariffs on Mexico and Canada have been delayed, they have kicked in for China, according to Yahoo! Finance. This has led to several retailers moving sourcing out of China to contain costs.
Simeon Siegel, retail analyst at BMO Capital Markets, appeared in an episode of Yahoo! Finance’s Opening Bid podcast. Talking about the potential effect of Trump’s tariffs on retail stocks, he was of the opinion that we are focusing on tariffs more than is required. Taking a purely business perspective, he reasoned that a tariff is nothing more than a cost input going up, quite like how the cost of cotton, shipping, or labor can rise.
When such cases materialize, companies take steps to deal with the rising costs, but they don’t become all-encompassed by them. Siegel posited that the uncertainty surrounding this scenario is dramatically more concerning than the actual severity. Approaching the situation as an analyst, he said that he is focusing on companies with the pricing power and capability to deal with rising costs, regardless of why the costs are increasing. Healthy brands with healthy businesses are thus the way to approach this conversation.”
With these trends in view, let’s look at the 12 best apparel stocks to invest in.
A fashionable retail store showcasing the company’s apparel products.
Our Methodology
We sifted through stock screeners, online rankings, and ETFs to compile a list of 20 apparel stocks. We then selected the top 12 most popular stocks among elite hedge funds as of Q4 2024. We sourced the hedge fund sentiment data from Insider Monkey’s database. The list is sorted in ascending order of hedge fund sentiment.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
12 Best Apparel Stocks to Invest In
12. Foot Locker, Inc. (NYSE:FL)
Number of Hedge Fund Holders: 35
Foot Locker, Inc. (NYSE:FL) is an apparel and shoe retailer that operates in three segments: North America, Europe, Middle East, and Africa (EMEA), and Asia Pacific. Its portfolio of brands includes Foot Locker, Kids Foot Locker, Champs Sports, Atmos, and WSS. The omnichannel retailer operates around 2,523 stores in 26 countries across Europe, North America, New Zealand, Australia, and Asia.
The company drove three consecutive quarters of positive comparable sales and year-over-year gross margin expansion, reflecting the results of its strategies in an increasingly dynamic external environment. It attained a total comp increase of 2.6% in fiscal Q4 2024, supported by share gains from its global Foot Locker and Kids Foot Locker banners. Foot Locker, Inc. (NYSE:FL) also saw a gross margin improvement of 300 basis points year-over-year, ahead of its expectations and led by merchandise margin recovery against the prior year’s higher level of promotions.
Foot Locker, Inc.’s (NYSE:FL) continued execution of its cost savings plan generated $35 million in fiscal Q4 2024. The company has solid operations and attained significant financial milestones in 2024, including a return to positive enterprise comp sales growth, gross margin expansion, and positive free cash flow. It expects all of these trends to continue into 2025, ranking it on our list of the best apparel stocks to invest in.
11. Urban Outfitters, Inc. (NASDAQ:URBN)
Number of Hedge Fund Holders: 37
Urban Outfitters, Inc. (NASDAQ:URBN) is a lifestyle products and services company that operates through three segments: Retail, Wholesale, and Nuuly. The Retail segment encompasses its store and digital channels and manages the Anthropologie, Free People, FP Movement, and Urban Outfitters brands. The Nuuly segment comprises the Nuuly brand, which includes Nuuly Thrift and Nuuly Rent, a monthly women’s apparel subscription rental service.
The company reported a 9% sales growth in fiscal Q4 2025, reaching record $1.6 billion. Four of its brands performed exceptionally, posting record Q4 sales. Urban Outfitters, Inc. (NASDAQ:URBN) also made significant progress in slashing the operating loss of its Urban Outfitters brand compared to last year while also improving its sales trend. Its sales growth was partly driven by a 5% increase in the Retail segment comp due to a high single-digit DTC channel comp and a low single-digit store comp.
Anthropologie and Free People also attained high single-digit positive Retail segment comp. Urban Outfitters, Inc.’s (NASDAQ:URBN) Nuuly segment also delivered robust double-digit revenue growth, primarily due to a 53% increase in average active subscribers compared to the prior year.