In this article we will look at the 11 Best Fashion Stocks To Buy Now. Let’s look at where The Gap, Inc (GAP) 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).
Pixabay / Public Domain
The Gap, Inc (NYSE:GAP)
Gap (NYSE:GAP) is a specialty apparel company that offers apparel, accessories, and personal care products for women, men, and children under a portfolio of brands, including Gap, Old Navy, Banana Republic, and Athleta. This omnichannel retailer sells its merchandise to customers both online and in-store through corporate-operated and franchise stores, websites, and third-party arrangements. The company offers enhanced mobile-enabled experiences to streamline online shopping for its customers across its brand collection. Gap (NYSE:GAP) offers adult apparel and accessories, GapFit, Gap Maternity, GapBody, and babyGap collections. In contrast, Banana Republic is a premium lifestyle retailer that offers versatile and high-quality womenswear, menswear, and home design.
Gap’s (NYSE:GAP) recent Q2 2024 quarter delivered strong results, exceeding analyst expectations. It gained market share for the sixth consecutive quarter, giving it a stronger position across key metrics such as net sales, cash position, and margins. It is undertaking continuous initiatives to reinvigorate its brand portfolio and unlock the company’s full potential, which highlights the solid profitability model it is running on.
Net sales increased 5% in Q2, with comps growing by 3%. The company’s primary focus is continuing this profitability trajectory by building stronger brand identities through trend-right products, increasing cultural relevance, and engaging in an engaging omnichannel experience.
To do so, it has launched several campaigns, including the Get Loose campaign featuring Troy Sevan and Dance Company CDK. This campaign solidified Gap’s (NYSE:GAP) standing as the ultimate destination for the baggy and oversized trend, giving it a competitive edge. It also built on momentum and share gains in the Kids segment, launching one of its strongest back-to-school campaigns by adopting a new media mix model and boosting kid demand via mom-approved messaging. Such collaborations continually amplify the company’s market standing, setting it up for long-term success.
Gap (NYSE:GAP) began working with Omnicom Group Inc. (NYSE:OMC), its new media partner, in Q3 to modernize its capabilities. It is shifting from a promotional media-focused company focused on performance to a full-funnel strategy to increase the effectiveness of its marketing spend. It prioritizes leveraging data and optimization to a greater extent and implementing best execution practices to become more consumer-led. Although the initiative is in its early stages, it is expected to significantly improve the economics of its marketing spend and alter its brand standing.
Overall, GAP ranks ninth 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 GAP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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