In this article we will look at the 11 Best Fashion Stocks To Buy Now. Let’s look at where Crocs, Inc. (CROX) stands against other 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.
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).
Pixabay/Public Domain
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”.
Overall, CROX ranks eighth among the 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 CROX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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