Below we present the list of 5 Best Fashion Stocks To Buy Now. For our methodology and a more comprehensive list please see the 11 Best Fashion Stocks To Buy Now.
5. Abercrombie & Fitch Co. (NYSE:ANF)
Number of Hedge Fund Shareholders: 26
Abercrombie & Fitch Co. (NYSE:ANF) shares have slumped by 37% over the last year, and though there’s been a slight decline in smart money ownership of ANF during that time, funds are largely sticking with the stock though this lean period. David Paradice’s Paradice Investment Management has been a shareholder of ANF for more than a year, while Steve Cohen’s Point72 Asset Management sold out of its stake during Q4 of 2021 but added it back to its portfolio in Q2 of this year.
Abercrombie & Fitch Co. (NYSE:ANF) shares have posted 27% gains since November 21 following the release of the company’s Q3 results. While year-over-year comps were understandably not great, the company did beat expectations by pulling in $880 million in revenue and earning $0.01 per share on an adjusted basis. Analysts on the other hand were expecting the company to lose money during the quarter.
Abercrombie & Fitch Co. (NYSE:ANF)’s namesake brand continued to perform this well, posting 10% year-over-year sales growth, following 13% and 5% gains in the first two quarters of the year respectively. The company’s Hollister brand is struggling however, incurring double digit sales declines in the each of the last two quarters. Abercrombie is trading at just 11.7x forward earnings, which looks cheap, and could explain why hedge funds have been hanging onto the stock.
4. Tapestry, Inc. (NYSE:TPR)
Number of Hedge Fund Shareholders: 40
Hedge fund ownership of Tapestry, Inc. (NYSE:TPR) crested to an all-time high in the first quarter of 2021 but has fallen by 26% since then. Many of the stock’s biggest shareholders remain bullish on the company however, including Arrowstreet Capital, which increased the size of its TPR position by 587% during Q3 to 3.67 million shares.
High-end retailer Tapestry, Inc. (NYSE:TPR), which owns the popular brands Kate Spade, Coach, and Stuart Weitzman, grew sales by 2% in the first quarter of its fiscal 2023, hitting $1.5 billion. Tapestry’s net income fell by over $30 million year-over-year to $195 million due to rising costs, but its $0.79 in earnings per share were down by just $0.01 from a year earlier thanks to the company buying back over 13% of its outstanding shares over the prior year.
Despite the relatively solid quarter given the economic backdrop, Tapestry, Inc. (NYSE:TPR) cut its full fiscal year guidance by about $350 million on the top line, and by approximately $0.20 on the bottom line. The company is hopeful that outperformance will Asia and Europe will help offset some of the expected weakness in North America and China, which are its two largest market.
3. Capri Holdings Limited (NYSE:CPRI)
Number of Hedge Fund Shareholders: 44
Hedge fund ownership of Capri Holdings Limited (NYSE:CPRI) has remained relatively stable over the last five years, save for a steep decline during the first half of 2020 that was quickly negated. David Einhorn’s Greenlight Capital, which has been preparing its portfolio for a possible recession, has been buying shares of CPRI throughout much of the past four quarters, increasing the size of its stake from 606,000 to 988,500 shares during that time.
Capri Holdings Limited (NYSE:CPRI) looks like a rather compelling value stock, which likely explains the stability of hedge fund ownership. Its shares currently trade at just 7.9x forward earnings and 1.44x sales. Its shares have been trending up over the past few weeks after the company topped sales estimates with its fiscal Q2 results, though it also trimmed about $100 million off its full fiscal year projections.
Capri Holdings Limited (NYSE:CPRI), which manages the luxury brands Michael Kors, Versace, and Jimmy Choo, has enjoyed surprising strength in Europe, but expects consumer weakness to prevail in 2023, which likely explains its reduced guidance. The company’s Chairman and CEO John Idol anticipates European consumer sentiment weakening considerably and is also concerned about how North American consumers will be positioned by the second half of next year.
2. Lululemon Athletica Inc. (NASDAQ:LULU)
Number of Hedge Fund Shareholders: 57
Hedge funds are going gaga over LULU. Lululemon Athletica Inc. (NASDAQ:LULU) was held in a record number of 13F portfolios during Q3 after a 30% increase in the smart money’s ownership of the stock over the past two quarters. Noam Gottesman’s GLG Partners and Steven Boyd’s Armistice Capital are among the many funds to have added LULU to their holdings this year.
Lululemon Athletica Inc. (NASDAQ:LULU) started out primarily as a seller of yoga apparel for women, but has rapidly expanded into men’s apparel and the broader athleasure apparel category in recent years. The company is continuing to push harder into men’s apparel, grow its digital business, and drive international (which currently accounts for just 17% of sales) expansion, which it believes will allow it to achieve a 15% CAGR through its 2026 fiscal year.
Lululemon Athletica Inc. (NASDAQ:LULU)’s sales soared by 29% during its fiscal quarter ended July 31, with a stellar 23% increase in comparable sales. And while most other fashion retailers have seen margins and profits slump this year, Lululemon’s earnings per share surged to $2.26 in its latest reported quarter, up $0.67 from a year earlier. It also grew its gross and operating margins, with the former hitting 56.5%.
1. NIKE, Inc. (NYSE:NKE)
Number of Hedge Fund Shareholders: 70
Topping the list best fashion stocks to buy now is NIKE, Inc. (NYSE:NKE), ownership of which is flat over the last year among hedge funds even as shares have tumbled from their all-time highs. Terry Smith’s Fundsmith LLP and Ken Fisher’s Fisher Asset Management remain the two largest shareholders of NKE among the funds tracked by our database, as they were a year ago.
NIKE, Inc. (NYSE:NKE) doesn’t have anywhere near the sales growth or operational efficiency that Lululemon currently does, but there’s a lot to like about the stock nonetheless. For one, it has a decent and growing dividend that yields 1.26%. Given Nike’s low payout ratio and expected future earnings growth, there should be nothing stopping the dividend from continuing to grow annually for the foreseeable future. And while Nike’s sales grew by just 4% in Q3, they were up 10% on a constant currency basis, which is rather impressive.
The RiverPark Funds’ Large Growth Fund believes NIKE, Inc. (NYSE:NKE) will continue to exhibit strong top-line growth into the future, as it discussed in its Q3 2022 investor letter:
“Nike: NKE shares were a top detractor this quarter on higher inventory balances leading to lower-than-expected gross margins for the next couple of quarters. The company reported 1Q23 sales and EPS beats, but freight costs, markdowns, and the strong dollar weighed on gross margins. Nike continues to expect low double-digit currency-neutral sales growth, but the strong dollar will reduce overall sales growth and discounted inventory will further reduce gross margins for the year.
Nike 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. After working through its near-term currency and gross margin issues, we expect the company to return towards management’s guidance of at least 10% annual revenue growth, and return to its accelerating profit growth, as longer-term we expect margins to be materially aided by 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 top-line 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.”
For more of the latest stock picks worth considering for your portfolio, check out the 13 Best Bear Market Stocks To Buy and the Marc Cuban Stock Portfolio.
Disclosure: None.
