In this article we will look at the 11 Best Fashion Stocks To Buy Now. Let’s look at where Burlington Stores, Inc. (BURL) 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
Burlington Stores, Inc. (NYSE:BURL)
No. of Hedge Funds as of Q2 2024: 42
Burlington Stores (NYSE:BURL) is an off-price retailer selling branded apparel, accessories, footwear, and house merchandise at discounted prices every day. Its stores offer an elaborate collection of fashion-focused, in-season merchandise, including women’s ready-to-wear apparel, youth apparel, menswear, beauty, footwear, accessories, coats, and others.
The company operates through five distribution centers, two of which are located on the East Coast in New Jersey and three on the West Coast in California. These five centers occupy an aggregate of around 4.10 million square feet and offer processing, storage, and shipping capabilities. The company also has third-party arrangements for the use of pool point facilities. It operates more than 1,000 stores.
Burlington Stores (NYSE:BURL) experienced a 13% total sales growth compared to a 9% sales growth in 2023. When considered on a compound basis, the company is now 24% bigger than two years ago, highlighting its solid expansion and growth trajectory. It opened 36 net new stores in Q2 2024, and relocated four of its older oversized locations. That brings the total number of new stores opened for the fiscal year-to-date to 50, along with 15 additional relocations. The company has plans to open 100 new stores and relocate 30 others for the year as a whole. It expects its new stores to run around $7 million in sales in their first full year, further solidifying the company’s market presence and boosting sales.
Total sales in Q2 2024 grew by 13% as compared to Q2 2023, with new stores being the primary driver of this growth. Comp sales growth is another key driver of top-line sales. Comp-store sales grew by 5%, surpassing guidance of flat to 2%. The company also expanded its operating margin and gross margin, driven by lower markdowns and faster inventory turns. In addition, its faster-than-expected supply chain efficiency initiatives also drove 60 basis points of leverage in the supply chain. Burlington Stores is now focusing its attention on delivering greater value across income bands and demographics.
42 hedge funds hold stakes in the stock, with Citadel Investment Group holding the highest stakes worth $284.22 million as of Q2 2024. It takes the seventh spot on our list of the best fashion stocks.
ClearBridge SMID Cap Growth Strategy stated the following regarding Burlington Stores, Inc. (NYSE:BURL) in its fourth quarter 2023 investor letter:
“Interest rate relief also had a strong impact on more cyclical companies and those with ties to general consumer spending. For example, consumer discretionary holdings and discount retailers Burlington Stores, Inc. (NYSE:BURL) and Five Below both rose during the quarter thanks to improving outlooks. Five Below, a specialty value retailer for products including apparel, accessories, novelty items, décor, cosmetics and accent furniture, rebounded from being one of the third quarter’s worst-performing stocks. We believe both Five Below and Burlington are particularly well-positioned for an economic environment where consumer budgets are being tightened but demand for discretionary goods remains stable.”
Overall, BURL ranks seventh 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 BURL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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