We recently published a list of the Top 12 Luxury Clothing Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Ermenegildo Zegna N.V. (NYSE:ZGN) stands against other top luxury clothing stocks to buy according to hedge funds.
Overview of the Luxury Goods Market
According to a report by Mordor Intelligence, the luxury goods market has a size of $103.10 billion as of 2024. It is expected to grow at a compound annual growth rate (CAGR) of 7.07% and reach $145.08 billion by 2029. Another study by Global Market Insights published on Yahoo! Finance shows that the luxury packaging market was valued at $17.2 billion in 2023. It is also anticipated to grow and reach $25.8 billion by the end of 2032.
Some of the primary reasons behind this growth include a rise in disposable incomes and wealth in various regions across the globe, especially in emerging markets such as India and China. In addition, younger customers such as millennials and Gen Z are entering the luxury market, with the rise of influencer marketing and social media further increasing the desirability of these products.
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Changing Consumer Spending Patterns
However, analysts expect 2025 to be a challenging year for the luxury sector. The personal luxury goods market declined for the first time since 2008, excluding 2020 due to the effects of the Covid-19 pandemic. According to the Fall 2024 Bain-Altagamma Luxury Goods World Wide Market Study, the market fell from a historic high of $387 billion in 2023 to around $381 billion. However, Bain emphasized the “long-term solid fundamentals” of the industry, saying that the luxury market “can still return to solid growth.”
Consumer spending in the personal luxury goods market is affected by macroeconomic uncertainty and a slowdown in China, according to Bain & Company’s annual luxury report. Dwindling customer loyalty and higher costs are resulting in consumers steering clear of high-end brands in 2024, slashing company profits. These consumer spending patterns are anticipated to shrink the sector by an estimated 2% over the full-year period. The report also showed that the overall luxury spending is expected to remain flat year-over-year in 2024, standing at around $1.59 billion even with other segments, such as travel, fine wine, and autos, recording modest growth.
However, the condition is not all bleak. We discussed consumer spending and the luxury market in a recently published article on the Top 12 Luxury Stocks According to Hedge Funds. Here is an excerpt from the article:
On December 17, Simeon Siegel, BMO Capital Markets senior analyst for retail and e-commerce, appeared on CNBC to discuss the state of the consumer in the current holiday shopping season. He said that the US consumer is overly resilient. In the current scenario, the market is seeing winners grow and laggers fall behind, which is how it should be. This trend goes opposite to market dynamics in COVID-19 when every company grew. Siegel was further of the view that the consumers are still spending. For better and for worse, consumers are scared of not having something under the Christmas tree this year.
On December 10, CNBC’s Steve Liesman appeared on ‘Squawk Box’ to discuss the CNBC NRF Retail Monitor. Numbers from the Monitor corroborated Siegel’s claim and showed healthy consumer spending in November despite a shorter holiday shopping season in 2024. Non-store retailers showed a 21.5% year-over-year growth, reflecting these positive trends. Since this holiday shopping season came with lower gas prices and a deflation in the prices of goods overall, consumers had more discretionary dollars in their pockets and paid somewhat less compared to a year ago. Since luxury items fall in the category of discretionary items, these trends show positive stimulus for the industry.
Our Methodology
We sifted through stock screeners, online rankings, and ETFs to compile a list of 20 luxury clothing stocks. We then selected the top 12 most popular stocks among elite hedge funds as of Q3 2024. We sourced the hedge fund sentiment data from Insider Monkey’s database. The list is sorted in ascending order of hedge fund sentiment.
Why do we care about what hedge funds do? 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).
A seasoned tailoring professional hand sewing with intricate precision a formal suit.
Ermenegildo Zegna N.V. (NYSE:ZGN)
Number of Hedge Fund Holders: 13
Ermenegildo Zegna N.V. (NYSE:ZGN) is a luxury brand that manufactures and designs luxury women’s and children’s wear, luxury menswear, leather goods, footwear, and other accessories under its Zegna and Thom Browne brands. The company is famous for symbolizing iconic Italian luxury menswear. It operates a vast network of luxury flagship boutiques and concessions, and has dressed famous world leaders and celebrities in its quest to solidify its image of Italian luxury.
Ermenegildo Zegna N.V.’s (NYSE:ZGN) revenues for fiscal year 2024 reflect a 2.2% year-over-year increase from fiscal year 2023. Revenues for fiscal Q4 2024 also underwent a 3.3% year-over-year increase. This growth was attributed to ZEGNA’s direct-to-consumer (DTC) channel, which grew by 11% with double-digit growth in the US and EMEA. Thom Browne and TOM FORD brands also reported positive growth in the DTC channel in the quarter.
Thus, the company has a strategic project pipeline. While it expects ongoing volatility in consumer demand in China, the Americas and EMEA showed solid performance in the company’s brands in the first weeks of January. Ermenegildo Zegna N.V. (NYSE:ZGN) plans to navigate these challenges and focus on long-term growth in 2025 by continuing investments in strategic projects and building on brand equity.
Overall, ZGN ranks 10th on our list of the top 12 luxury clothing stocks to buy according to hedge funds. While we acknowledge the potential of ZGN, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ZGN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.