In this article we will look at the 11 Best Fashion Stocks To Buy Now. Let’s look at where Abercrombie & Fitch Co. (ANF) 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
Abercrombie & Fitch Co. (NYSE:ANF)
No. of Hedge Funds as of Q2 2024: 48
Abercrombie & Fitch (NYSE:ANF) is a global, digitally-led omnichannel retailer offering personal care products, apparel, and accessories for women, men, and kids. These products are primarily sold through company-owned stores, digital channels, and a number of third-party arrangements. It operates through a portfolio of brands, such as Abercrombie and Fitch, Abercrombie Kids, and Hollister brands, which include Hollister and Gilly Hicks.
The company operates throughout the Americas, APAC, and EMEA. The APAC segment operates in the Asia-Pacific region, including Oceania and Asia. The EMEA segment operates in Europe, the Middle East, and Africa. Abercrombie &Fitch (NYSE:ANF) operates 40 international franchise stores across its brands, primarily in the EMEA region and the Americas.
The company runs on strong financials. Net sales in Q2 2024 grew by 21% to $1.1 billion, with an operating margin of 15.5%. In addition, Q2 2024 marked the seventh consecutive quarter of net sales growth in an uncertain, dynamic consumer environment. This highlights the underlying strength of the company’s brands and its strong global consumer base. Bolstered by a culture of financial discipline and an agile supply chain, the company is positioned to deliver its goals across a variety of macro environments.
The company’s sales growth was driven by expansion across brands, regions, and genders. Consistent with the previous five quarters, it saw growth in both units and AUR, highlighting the strong model it is functioning on. Abercrombie & Fitch (NYSE:ANF) is delivering lifestyle assortments with growing relevance to local customers, expanding its consumer base, and developing across key categories. It delivered operating leverage in Q2, funding significant marketing, technology, digital, and people investments to strengthen its long-term goals. These efforts led to an operating income of $176 million for Q2, nearly double the results from Q2 2023.
Abercrombie & Fitch (NYSE:ANF) has plans to amplify its brands, opening new store locations, refreshing store experiences, and investing in incremental marketing to boost engagement. It is also reintroducing its Hollister brands to expand its target audience. The elevated marketing investment spans social and digital channels, along with authentic, real-life activations and experiences. It ranks third on our list of the best fashion stocks.
Here’s what Chartwell Investment Partners, LLC said about Abercrombie & Fitch Co. (NYSE:ANF) in its third-quarter 2023 investor letter:
“Within the Carillon Chartwell Small Cap Growth Fund, information technology and industrials were the strongest-performing sectors, with strong stock selection leading to alpha generation. Abercrombie & Fitch Co. (NYSE:ANF) reported very strong earnings driven by significant margin improvement that resulted from much lower shipping and freight costs compared to last year.”
Overall, ANF ranks third 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 ANF but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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