In this article we will look at the 11 Best Fashion Stocks To Buy Now. Let’s look at where Lululemon Athletica, Inc. (LULU) 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).
11 Best Fashion Stocks to Buy Now
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.
Overall, LULU ranks fourth 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 LULU but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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