In this article we will look at the 11 Best Fashion Stocks To Buy Now. Let’s look at where Ross Stores, Inc. (ROST) 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
Ross Stores, Inc. (NASDAQ:ROST)
No. of Hedge Funds as of Q2 2024: 53
Ross Stores Inc. (NASDAQ:ROST) is a home fashion and off-price apparel chain in the US. It offers name-brand and designer in-season apparel, footwear, accessories, and home fashion for a broad audience, with 20% to 60% discounts compared to regular department and specialty stores. The company operates around 1,764 locations in 43 states across the US, Guam, and the District of Columbia.
It also operates around 345 dd’s DISCOUNTS® stores in 22 states in the US, bringing the total number of Ross stores and dd’s DISCOUNTS® stores to more than 2,109. In June and July, the company announced the opening of 21 Ross stores and three dd’s DISCOUNTS® stores across 17 states in the US. This expansion is part of the company’s plans to open around 90 new stores in fiscal 2024, divided into 75 Ross and 15 dd’s DISCOUNTS® stores.
The company’s solid and profitable model is appealing to investors. Its sales increased for the 2024 year-to-date period, going from $9.4 billion in 2023 to $10.1 billion in 2024. Comparable store sales also grew by 4% in Q2 2024, primarily because of increased basket size and improved traffic. Apart from rising sales, Ross’s improved profitability also benefited from lower incentive and distribution costs. Ross Stores Inc. (NASDAQ:ROST) is taking steps to continue these improving trends by adjusting its assortments in its newer markets to resonate with a wider customer base.
Ross Stores Inc. (NASDAQ:ROST) plans to open 47 new stores in Q3, including 43 Ross and 4 dd’s DISCOUNTS® stores. Its continuous expansion strategy gives it a major competitive edge in the industry. As of Q2 2024, 53 hedge funds hold stakes in the stock, with D E Shaw holding the largest stake worth $420.48 million. It takes the second spot on our list of the best fashion stocks to buy now.
TimesSquare Capital U.S. Mid Cap Growth Strategy stated the following regarding Ross Stores, Inc. (NASDAQ:ROST) in its fourth quarter 2023 investor letter:
“In Consumer-oriented sectors, we lean towards value-oriented or specialty retailers, franchise models, as well as premium brands. Also gaining 23% over the quarter was Ross Stores, Inc. (NASDAQ:ROST), an off-price retailer featuring apparel and home fashions. Third-quarter results were solid as sales comparisons accelerated with higher levels of customer traffic across geographies. Management raised full-year guidance. We added to the position given our increased conviction at the start of the quarter.”
Overall, ROST ranks second 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 ROST but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
