In this article, we will look at the Top 11 Luxury Clothing Stocks to Invest in Now.
Overall View of Trends in the Luxury Sector
The luxury segment in retail has been a prominent driver of growth in the industry. It is primarily considered a status symbol, driving discretionary spending among customers with high purchasing power.
According to a report by Mordor Intelligence, the luxury retail sector has a market size of $110.13 billion as of 2024, and is expected to grow to $151.32 billion by 2029, at a compound annual growth rate of 6.56%. While the Asia-Pacific region is the fastest-growing market in the luxury retail domain, the largest market remains concentrated in Europe.
According to McKinsey’s The State of Fashion 2024 report, the global apparel industry is expected to experience top-line growth of 2%- 4% in 2024, with variations possible in countries and regions. Quite like in previous years, the luxury segment is anticipated to generate the most significant economic profit.
However, companies in the sector may experience a tough economic environment. Growth is anticipated to slow down to 3%- 5% in 2024 compared to 5%- 7% in 2023 as the post-pandemic shopping rush slows down. However, these growth trends are likely to be contrasting in Europe and the US. While growth is set to slow in China and Europe, it is expected to pick up speed in the US after a relatively weak 2023.
Distribution of luxury apparel and improved supply chains are some of the industry’s significant growth drivers. For example, Saudi Arabia’s General Authority for Competition approved the joint venture between G Distribution B.V. and Al Rubaiyat Co. for Industry & Trade Holding in December 2021 to sell and distribute Gucci products in the country. Digital media and digital marketing are also increasing the popularity of luxury clothing among millennials, which is, in turn, driving market growth.
A Slow First Half of 2024 for Luxury Retailers
Several luxury retailers experienced substantial profit drops in the first half of 2024. The overall market is experiencing widespread struggles, primarily because luxury brands have traditionally relied heavily on Chinese consumers. With the slowing Chinese economy and a cautious consumer base, this heavy reliance is proving unprofitable, as people are reducing their spending on luxury goods. The economic slowdown in China is attributed to factors such as lower land sales, an aging population, and decreased exports.
Despite the challenges, some brands made significant strides, such as the Italian high-fashion women’s clothing and accessory brand Miu Miu, which saw nearly 60% growth last year and 90% growth in the first quarter of this year. This helped its parent company, Prada Group, increase its sales as well.
The luxury market has historically bounced back from downturns, and many in the industry hope the current challenges are temporary. Luxury brands are comparatively less affected by economic conditions as most of their purchases are made by a very small group of elite consumers.
With these trends in mind, let’s examine the top 11 luxury clothing stocks to invest in now.
Photo by John Cameron on Unsplash
Our Methodology
For this article, we made a list of nearly 20 luxury stocks with positive analyst upside potential and used that as our primary metric to rank the list. We chose the top 11 stocks with the highest average analyst price target as of September 12, 2024. We have also considered the hedge fund sentiment around each stock as a secondary metric, and sourced data from Insider Monkey’s database of over 900 elite hedge funds as of Q2 2024.
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).
Top 11 Luxury Clothing Stocks to Invest in Now
11. Capri Holdings Limited (NYSE:CPRI)
Analyst Upside Potential as of September 12, 2024: 8.98%
No. of Hedge Funds as of Q2 2024: 52
Capri Holdings Limited (NYSE:CPRI) manages and operates globally popular luxury brands such as Jimmy Choo, Versace, Michael Kors, and others. It manufactures, markets, and distributes women’s and men’s apparel, accessories, footwear, and other items under its three segments: Michael Kors, Versace, and Jimmy Choo. The Versace segment includes luxury apparel, accessories, and footwear. It is directly operated through boutiques, outlet stores, and e-commerce sites across the Americas and certain parts of Europe, Africa, the Middle East, and Asia. Jimmy Choo’s segment covers luxury footwear, small leather goods, accessories, and handbags. The Michael Kors segment operates through four retail formats: lifestyle stores, e-commerce sites, collection stores, and outlet stores. It covers the sale of Michael Kors products.
Capri Holdings Limited (NYSE:CPRI) entered into a definitive agreement to be acquired by Tapestry Inc. (NYSE:TPR). However, the proposed transaction was blocked by the FTC in April. Capri (NYSE:CPRI) announced plans to vigorously defend the case, and is looking forward to the successful completion of the acquisition. It claims that the deal will not just deliver value to its shareholders, but will also provide new opportunities for its employees and customers.
Its Q1 fiscal 2025 earnings report showed continuing customer engagement across its three segments. Around 12.6 million new customers were added to its databases, showing that Capri Holdings’ (NYSE:CPRI) brands are continuing to resonate with consumers. These numbers represent a growth of 15% compared to last year, reflecting the value and strong brand equity of its three segments.
The stock is currently trading at a forward P/E of 15.68, a -0.70% discount to its sector. Its median price target of $38.54 implies an upside of 8.98% from current levels. 52 hedge funds hold stakes in the stock, with Pentwater Capital Management holding the highest stake, worth $100.92 million, as of Q2 2024. Capri Holdings (NYSE:CPRI) ranks 11th on our list of the top 11 luxury clothing stocks to invest in now.
10. Ralph Lauren Corporation (NYSE:RL)
Analyst Upside Potential as of September 12, 2024: 11.16%
No. of Hedge Funds as of Q2 2024: 36
Ralph Lauren (NYSE:RL) specializes in designing, marketing, and selling luxury lifestyle products, including apparel, footwear, accessories, fragrances, home, and hospitality. Its brands are spread across North America, Europe, and Asia. Its brand portfolio includes Ralph Lauren, Polo Ralph Lauren, Ralph Lauren Collection, Lauren Ralph Lauren, Ralph Lauren Purple Label, Double RL, and others. Apart from manufacturing luxury items for men, women, and children, the company’s hospitality segment includes restaurants like New York City’s The Polo Bar and Chicago’s RL Restaurant.
Ralph Lauren (NYSE:RL) is functioning on financial stability. Q1 fiscal 2025 results exceeded analyst expectations, with total revenue surpassing guidance by 3%. To continue positive growth trends, the company is investing in its strategic priorities, including digital capabilities, marketing, and ecosystem expansion. These investments, along with Ralph Lauren’s (NYSE:RL) increased efficiencies and culture of operating discipline, are expected to enable the company to drive its long-term sustainability growth.
Q1 fiscal 2025 saw continued growth across the company’s three strategic pillars. These pillars include elevating and revamping its lifestyle brand, winning key cities via its consumer ecosystem, and driving the core while expanding for more. As part of efforts to revamp its lifestyle brand, Ralph Lauren (NYSE:RL) has undertaken activities in London, Milan, New York, and across China, increasing its social media following in the process. It has also managed campaigns across key demographics and geographics, such as the women’s collection runway show in New York City in April and the Only Polo campaign. Local activations were also delivered across SoHo in New York, Dubai, Miami’s Design District, L.A.’s Sunset Boulevard, Roppongi in Tokyo, and Seoul. These efforts are helping the company leverage longer-term brand building while focusing on new customer acquisition and high-quality sales.
The stock is currently trading at a forward P/E of 15.52, at a 1.74% discount to its sector. It recently got a Buy rating from Evercore ISI, Barclays, Jefferies, and Telsey Advisory. Ralph Lauren’s (NYSE:RL) current price target of $179 implies an upside of 11.16% from current levels. It takes the tenth spot on our list of the top luxury clothing stocks.