In this article, we discuss the 5 best clothing stocks to buy now. If you want to read our discussion on the apparel sector, go directly to 10 Best Clothing Stocks To Buy Now.
5. Target Corporation (NYSE:TGT)
Number of Hedge Fund Holders: 46
Target Corporation (NYSE:TGT) is a Minneapolis-based seventh biggest retailer in the US.
Although Target Corporation (NYSE:TGT) is not a pure play like the other apparel stocks, the company has 48 apparel brands in its portfolio, with 10 of these brands contributing over $1 billion in sales annually. The apparel and accessories segment contributed 17% to the company’s $93 billion top line in 2021. These brands have an omnichannel presence and provide an easy shopping experience to customers. Even during the COVID-19 pandemic, Target Corporation (NYSE:TGT) received a designation as an essential service and was not impacted by lockdowns and restrictions. Target Corporation (NYSE:TGT) is gearing up for the holiday season by employing nearly 100,000 seasonal employees and building up its inventory.
Here’s what Ensemble Capital said about Target Corporation (NYSE:TGT) in its Q2 2022 investor letter:
“Speaking on their earnings call, Target’s CEO Brian Cornell said that spending on items such as kitchen appliances, TVs and outdoor furniture – products that consumers splurged on while stuck at home – has declined sharply. While they had expected there to be a shift from spending on goods to services as America exited pandemic lifestyles, they didn’t anticipate the speed and magnitude of the shift. On the other hand, they saw luggage sales grow by an astounding 50%, along with robust growth in “going out” categories such as sunscreen, beauty products, and even toys as families return to hosting large birthday parties for their children. So, despite Target seeing increasing foot traffic and higher spending overall, they got caught with the wrong inventory relative to what customers wanted to buy. What this means for investors is that it is incorrect to say that the consumer is weak, despite weakness in some consumer facing companies. Rather what people are spending money on is changing rapidly, which is good or bad for a given company based on what they sell. Importantly, with demand shifting from items that were in short supply, there is good reason to think that inflation in these categories will moderate. Indeed, Target stated that their plan was to put their excess inventory on sale, something that consumers haven’t seen a lot of over the past two years. But as demand for COVID era goods moderates, demand for activities such as travel has surged, driving up inflation in airline tickets and hotel rooms. This illustrates the way that the shock waves from the pandemic have scrambled the typical economic cycle such that even at a time when all signs point to the biggest summer travel season in history, investors are worried that we are headed into, or are already in, a recession.”
4. Capri Holdings Limited (NYSE:CPRI)
Number of Hedge Fund Holders: 46
Capri Holdings Limited (NYSE:CPRI) is a New York-based fashion holding company with luxury brands like Jimmy Choo, Michael Kors, and Versace under its umbrella.
In a research note issued on September 16, Matthew Boss at JPMorgan increased the target price for Capri Holdings Limited (NYSE:CPRI) from $65 to $72 and reiterated an Overweight rating on the stock. According to economists, the US economy is heading towards a recession, and in the past, luxury fashion stocks like Capri Holdings Limited (NYSE:CPRI) have performed well in a recession. This is because the purchasing power of the higher income groups is not as impacted by the inflationary pressures as that of the lower income groups. During the 2008 recession, luxury brands barely saw a decline in sales.
Of the 895 hedge funds tracked by Insider Monkey at the end of Q2 2022, 46 funds held a stake in Capri Holdings Limited (NYSE:CPRI). Rima Senvest Management was the leading hedge fund investor in the company.
3. The TJX Companies, Inc. (NYSE:TJX)
Number of Hedge Fund Holders: 49
The TJX Companies, Inc. (NYSE:TJX) is a Framingham, Massachusetts-based apparel off-price retailer with a network of over 4,700 stores and five e-commerce platforms.
The TJX Companies, Inc. (NYSE:TJX) is in the business of buying inventory at extremely low cost and selling it at deep discounts to customers. The company constantly changes its merchandise and provides a treasure hunt experience at its stores and on the e-commerce platform. This help keeps the customers engaged and encourages them to come back for the new variety. The TJX Companies, Inc. (NYSE:TJX) has nearly 1,200 associates in its buying department and roughly 21,000 vendors.
In an investor note issued on August 18, John Kernan at Cowen increased the price target on The TJX Companies, Inc. (NYSE:TJX) from $72 to $77 and maintained an Outperform rating. The analyst noted that the stance of the company’s management was bullish related to the buying environment and thought that the outlook provided by The TJX Companies, Inc. (NYSE:TJX) could be modest coming into the holiday season.
Here’s what ClearBridge Investments said about The TJX Companies, Inc. (NYSE:TJX) in its Q4 2021 investor letter:
“The pandemic created opportunities for us to be more aggressive in a variety of areas of the market. We were opportunistic throughout the year, for example, in positioning the portfolio to benefit from a flush consumer eager to return to spending and traveling. New positions included TJX, an off-brand retailer with a large presence in the U.S. and Europe that should continue to benefit from the contraction of many traditional retailers, particularly as consumer spending resumes.”
2. Lululemon Athletica Inc. (NASDAQ:LULU)
Number of Hedge Fund Holders: 50
Lululemon Athletica Inc. (NASDAQ:LULU) is a Vancouver, Canada-based athletic apparel company that was founded in 1998.
Experts think that Lululemon Athletica Inc. (NASDAQ:LULU) has a strong presence in the highly competitive athletic apparel industry. This was reiterated by the fact that the company reported strong Q2 2022 results that surpassed consensus estimates due to the brand momentum and product innovation. Furthermore, Lululemon Athletica Inc. (NASDAQ:LULU) raised its guidance to a higher level than the analysts’ forecast.
Lululemon Athletica Inc. (NASDAQ:LULU) is said to have near-term momentum and long-term growth opportunities. Some experts believe that the decline in consumption patterns due to rising inflation is not impacting the sales of Lululemon Athletica Inc. (NASDAQ:LULU), as shown by recent trends, making it one of the best clothing stocks to buy now.
1. NIKE, Inc. (NYSE:NKE)
Number of Hedge Fund Holders: 72
NIKE, Inc. (NYSE:NKE) is a Beaverton, Oregon-based apparel, accessories, equipment, and footwear retailer. The company operates in the activewear, lifestyle, and sportswear category.
Piral Dadhania at RBC Capital initiated coverage on NIKE, Inc. (NYSE:NKE) stock with an Overweight rating and a target price of $125 in a research note issued on September 22. The analyst termed NIKE, Inc. (NYSE:NKE) stock as a 100-pound gorilla in the sportswear category with a dominant market leader position, leading product franchises, and an online platform that is aimed to drive growth in the future. Dadhania sees the recovery in the Chinese market as driving an increase in investor confidence and expects the trend to continue in the future also. The analyst thinks that NIKE, Inc. (NYSE:NKE) aims to remain one step ahead of its competitors. The company’s strong growth plans merit its inclusion in our list of the 10 best clothing stocks to buy now.
Here’s what RiverPark Funds said about NIKE, Inc. (NYSE:NKE) in its Q2 2022 investor letter:
“NIKE, Inc. (NYSE:NKE), also a previous holding, is, by far, the leading athletic footwear, apparel, and equipment company in the world with over $46 billion in revenue, $6 billion in 2021 annual free cash flow, and over $4 billion of excess cash. We expect the company to return to at least 10% annual revenue growth over the next few quarters, in line with management guidance. Moreover, we believe that NKE should continue its accelerating profit growth, as we expect margins to increase materially through rising average sales prices (from both increased pricing and a mix shift to more premium products), the company’s deep innovation pipeline, a secular shift from the company’s traditional wholesale channels to a more direct-to-consumer approach (now 35% of revenues up from 16% ten years ago), and a more streamlined supply chain. We believe that the continued global secular growth trend towards active wear will continue to aid Nike’s topline growth, while we expect the combined gross and operating margin improvements from its initiatives will drive long-term mid-teens or higher annual EPS growth for the foreseeable future. We took advantage of the selloff over the past few months to reinitiate a small position in NKE at a multi-year low in its valuation.”
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