In this article, we discuss the top 11 luxury clothing stocks to invest in now. To skip the detailed analysis of the luxury goods industry, go directly to the Top 5 Luxury Clothing Stocks to Invest in Now.
Brand Affinity Guides Spending Behavior
In an interview with CNBC on March 7, the CEO of luxury retailer Neiman Marcus Group, Geoffroy van Raemdonck emphasized the importance of brand loyalty compared to the economic conditions for the luxury goods industry. In the interview, he said that 40% of the company’s revenue is generated by only 2% of its clientele and that the core wealthy luxury customer is still spending. Van Raemdonck added that while he cannot predict the future of luxury goods in 2024, he is still “cautiously optimistic” about the industry.
The recent earnings of luxury clothing companies show that economic volatility takes a back seat to brand appeal in luxury spending habits. On April 25, Hermes International SCA (EPA:RMS) reported consolidated revenue of €3.805 billion in the first quarter of 2024, up 17% year-over-year at constant exchange rates and 13% at current exchange rates. Compared to that, On April 16, LVMH Moet Hennessy Louis Vuitton SE (EPA:MC) reported organic revenue growth of a mere 3% to €20.7 billion in Q1 2024, and Kering SA (EPA:KER) posted its Q1 2024 earnings on April 23, reporting revenue of €4.5 billion, which was down 10% on a comparable basis.
According to a Bloomberg report, Kering SA’s (EPA:KER) main culprit is a decline in sales in the China region. The downturn includes rising unemployment in the country, property market downturns, and deflationary pressures, which have severely affected consumer confidence and spending. Furthermore, Gucci’s recent creative direction changes that aim for a more minimalist aesthetic under new creative director, Sabato De Sarno, have not yet resonated with Chinese consumers. The company CEO, François-Henri Pinault said:
“Kering’s performance worsened considerably in the first quarter. While we had anticipated a challenging start to the year, sluggish market conditions, notably in China, and the strategic repositioning of certain of our Houses, starting with Gucci, exacerbated downward pressures on our topline. In view of this revenue decline, together with our firm determination to continue investing selectively in the long-term appeal and distinctiveness of our brands, we now expect to deliver sharply lower operating profit in the first half of this year. All of us are working tirelessly to see Kering through the current challenges and rebuild a solid platform for enduring growth.”
Louis Vuitton SE (EPA:MC) did comparatively better in the first quarter as its revenue grew among most of its luxury goods segments but its wines and spirits segment revenues dropped to €1.1417 billion, down 12% year-over-year on organic basis and its selective retailing group generated a revenue of €4.175 billion, seeing an 11% year-over-year organic growth. The company’s director of financial communications, Rodolphe Ozun made the following remarks:
“Firstly, to put some context on the revenue growth, the organic increase achieved in Q1 puts the average growth rate of the past five years at 10% for the group, and 16% for Fashion & Leather goods, implying significant market share gains. Secondly, LVMH continues to benefit from the diversity of its brands and its carefully crafted regional balance. They’ve served us well in recent years and still do in the complex and economic geopolitical environment, which continues to prevail. Finally, we will continue to invest selectively in our store network, the breadth and quality of which also proved a differentiating factor in recent years, whilst we will also endeavor to protect profitability.”
Exclusivity Makes Hermes a Winner
Finally, Hermes International SCA (EPA:RMS) seems to be undeterred by the slowdown in the luxury goods market as it still retains its ultra-wealthy customers, some of the company’s products are not even displayed on shelves and are reserved for a very small group of customers. The executive chairman of the company, Axel Dumas, made the following comments on April 25:
“The solid sales growth in the first quarter 2024 reflects the loyalty of our clients worldwide, the strength of the group’s artisanal model and the desirability of our creations in a more complex environment. Hermès pursues its strategy based on exceptional know-how, the finest materials and uncompromising quality.”
Barclays believes that, in the luxury goods market, companies that have greater engagement with high-end customers and strong control over pricing power should remain the winners and noted that Hermes International SCA (EPA:RMS) is one of those companies. As of February 29, the firm has a €2,410 price target on the company stock with an Overweight rating. Furthermore, Citi analyst Thomas Chauvet believes that Hermes International SCA (EPA:RMS) could surpass Louis Vuitton SE’s (EPA:MC) flagship brand in the near future, as reported by Bloomberg on April 15. The analyst noted that the company could reach revenue levels of €20 billion by 2027 or before.
Latest Updates Around US Luxury Stocks
On August 10, 2023, Tapestry, Inc. (NYSE:TPR) announced its plan to acquire Capri Holdings Limited (NYSE:CPRI) for $8.5 billion. However, the U.S. Federal Trade Commission (FTC) moved to block the deal on April 22. The FTC believes that this merger creates competition concerns and could have an adverse effect on both companies’ employees’ wages and benefits. The FTC said:
“The proposed merger threatens to deprive millions of American consumers of the benefits of Tapestry and Capri’s head-to-head competition, which includes competition on price, discounts and promotions, innovation, design, marketing, and advertising. The deal also threatens to eliminate the incentive for the two companies to compete for employees and could negatively affect employees’ wages and workplace benefits. Post acquisition, the combined Tapestry and Capri would employ roughly 33,000 employees worldwide.”
Capri Holdings Limited (NYSE:CPRI) also issued a statement after FTC’s move and said:
“Capri Holdings strongly disagrees with the FTC’s decision. The market realities, which the government’s challenge ignores, overwhelmingly demonstrate that this transaction will not limit, reduce, or constrain competition. Tapestry and Capri operate in the fiercely competitive and highly fragmented global luxury industry. Consumers have hundreds of handbag choices at every price point across all channels, and barriers to entry are low. Capri intends to vigorously defend this case in court alongside Tapestry and complete the pending acquisition. The U.S. FTC is the only regulator that did not approve this transaction, which received required approvals from all other jurisdictions. We remain confident in this combination and the value it will bring to all stakeholders.”
Meanwhile, Tapestry, Inc.’s (NYSE:TPR) CEO, Joanne Crevoiserat told Reuters that FTC’s understanding of the current market and consumer behavior is flawed, as well as its assessment of the deal’s impact on industry employees.
Moving on, while the luxury goods landscape is going through some troubles, its wealthy consumers seem to be less affected by the conditions of the economy. In light of that, some of the top luxury clothing stocks to invest in include NIKE, Inc. (NYSE:NKE), Capri Holdings Limited (NYSE:CPRI), and Lululemon Athletica Inc. (NASDAQ:LULU). You can also check out 20 Largest Apparel Companies in the World and 25 Most Valuable Luxury Companies in the World.
Top 11 Luxury Clothing Stocks to Invest in Now
Our Methodology
For this article, we used the Yahoo Finance stock screener to identify 25 clothing stocks listed on the NYSE or NASDAQ and then, filtered our list down to 14 stocks that have significant operations in the luxury clothing industry. Next, we narrowed down our list to 11 stocks that were most widely held by institutional investors.
The hedge fund data was taken from Insider Monkey’s database of 933 elite hedge funds. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
Top 11 Luxury Clothing Stocks to Invest in Now
11. Ermenegildo Zegna N.V. (NYSE:ZGN)
Number of Hedge Fund Holders: 12
Ermenegildo Zegna N.V. (NYSE:ZGN) is a manufacturer, designer, and distributor of luxury clothing through Zegna and Thom Browne, and has control over Tom Ford’s fashion operations.
On April 23, Ermenegildo Zegna N.V. (NYSE:ZGN) announced first-quarter earnings. The revenues increased 8.1% year-over-year to €463.2 million, and out of all the segments, the Zegna brand recorded the highest revenue of €324.9 million, witnessing an increase of 1.7% year-over-year.
According to Insider Monkey’s database, 12 hedge funds held stakes in Ermenegildo Zegna N.V. (NYSE:ZGN) in the fourth quarter of 2023, with positions worth $33.787 million. This is compared to 11 funds with total stakes worth $23.926 million.
Ermenegildo Zegna N.V. (NYSE:ZGN) is one of the top luxury clothing stocks that has caught the eye of institutional investors. Other such stocks include NIKE, Inc. (NYSE:NKE), Capri Holdings Limited (NYSE:CPRI), and Lululemon Athletica Inc. (NASDAQ:LULU).
10. G-III Apparel Group, Ltd. (NASDAQ:GIII)
Number of Hedge Fund Holders: 16
G-III Apparel Group, Ltd. (NASDAQ:GIII) is engaged in the designing, sourcing, and marketing of luxury clothing through a few of its brands, including Vilebrequin, Sonia Rykiel, and Wilsons Leather, among others.
On March 14, G-III Apparel Group, Ltd. (NASDAQ:GIII) reported its FY24 earnings, posting a year-over-year EPS growth of 234.68% at $3.75. Moreover, the stock is up by 85.48% over the past 12 months, as of April 24.
G-III Apparel Group, Ltd. (NASDAQ:GIII) was part of 16 hedge funds’ portfolios in Q4 of 2023 with a total stake value of $109.049 million. Madison Avenue Partners is the largest shareholder in the company and has a position worth $44.959 million as of the fourth quarter of 2023.
First Pacific Advisors stated the following regarding G-III Apparel Group, Ltd. (NASDAQ:GIII) in its fourth quarter 2023 investor letter:
“G-III Apparel Group, Ltd. (NASDAQ:GIII) is an apparel manufacturer that owns the Donna Karan, Karl Lagerfeld, and a stable of smaller brands globally. GIII also licenses, manufactures, and markets Tommy Hilfiger’s and Calvin Klein’s women’s, jeans, and some smaller lines in the U.S. CEO Maury Goldfarb is a relentless entrepreneur who has repeatedly evolved and grown the business – GIII was founded by Maury’s father almost 70 years ago as a leather goods importer and manufacturer. We have followed GIII for at least fifteen years, owned it briefly in 2010 and bought a small position at what we believed were very attractive prices during Covid.
Our position in GIII benefited from bargain basement expectations at the end of 2022. At the end of 2022, PVH announced it was insourcing its Tommy Hilfiger and Calvin Klein contracts starting in 2025. GIII was also suffering from a buildup of excess inventory and worries about the durability of consumer spending.20 But, starting from those low expectations, GIII has delivered good results, sold down its inventory, and announced licensing deals with Nautica, Halston and Champion to replace the PVH business.”
9. Oxford Industries, Inc. (NYSE:OXM)
Number of Hedge Fund Holders: 17
Oxford Industries, Inc. (NYSE:OXM) is an apparel company that provides luxury clothing through a few brands, including Tommy Bahama, Johnny Was, and others. Oxford Industries, Inc. (NYSE:OXM) was held by 17 hedge funds in the fourth quarter of 2023 with a total stake value of $51.637 million. As of Q4 of 2023, Millennium Management has increased its stake in the company by 349% and is the most significant shareholder with a position worth $17.790 million.
On March 28, Oxford Industries, Inc. (NYSE:OXM) increased its quarterly dividend by 3% to $0.67, payable by May 3 to the shareholders of record on April 19. The stock’s dividend yield is 2.50%, as of April 24. The company is one of the top luxury clothing stocks to invest in now.
ClearBridge Investments made the following comment about Oxford Industries, Inc. (NYSE:OXM) in its Q3 2023 investor letter:
“We also added Oxford Industries, Inc. (NYSE:OXM), in the consumer discretionary sector, which is an apparel company operating lifestyle brands including Tommy Bahama and Lilly Pulitzer. The company’s management team has been able to consistently improve Oxford’s operating margins and sales growth over the past few years, and we believe its current stock price represents an attractive value opportunity at relatively low risk for a strong portfolio of brands within the apparel industry.”
8. Nordstrom, Inc. (NYSE:JWN)
Number of Hedge Fund Holders: 28
Nordstrom, Inc. (NYSE:JWN) is a fashion retailer that offers luxury clothing through many of the brands it carries, including Gucci, Balenciaga, and Prada, among others. In the fourth quarter of 2023, 28 hedge funds had stakes in Nordstrom, Inc. (NYSE:JWN), with total positions worth $203.876 million. As of December 31, 2023, Citadel Investment Group is the most prominent shareholder in the company and has increased its stake by 452% to $63.172 million.
In the last twelve months, Nordstrom, Inc. (NYSE:JWN) has gone up by 26.63%, as of April 24. On April 9, Argus analyst Kristina Ruggeri reiterated a Buy rating and a $21 price target on Nordstrom, Inc. (NYSE:JWN).
7. V.F. Corporation (NYSE:VFC)
Number of Hedge Fund Holders: 30
V.F. Corporation (NYSE:VFC) designs, procures, and distributes premium clothing through different brands, including Supreme, Timberland, and The North Face, among others. V.F. Corporation (NYSE:VFC) is seventh on our list of top luxury clothing stocks to invest in now. V.F. Corporation (NYSE:VFC) is also a dividend stock and has a dividend yield of 2.77%, as of April 24.
V.F. Corporation (NYSE:VFC) was held by 30 hedge funds in the fourth quarter of 2023 and the stakes amounted to $498.252 million. Engaged Capital is the top shareholder of the company, and has a position worth nearly $100.418 million as of Q4 of 2023.
6. PVH Corp. (NYSE:PVH)
Number of Hedge Fund Holders: 35
PVH Corp. (NYSE:PVH) is an apparel company that offers premium clothing through a few of its brands, including Calvin Klein and Tommy Hilfiger. On April 15, Wedbush upgraded PVH Corp. (NYSE:PVH) to Outperform from Neutral and increased the price target to $128 from $113.
35 hedge funds held stakes in PVH Corp. (NYSE:PVH) in Q4 of 2023, with positions worth $1.7 billion. With 6.3 million shares, valued at $774,933 million, Pzena Investment Management is the largest shareholder of the company, as of December 31, 2023.
FPA Queens Road Small Cap Value Fund stated the following regarding PVH Corp. (NYSE:PVH) in its fourth quarter 2023 investor letter:
“PVH Corp. (NYSE:PVH) is an apparel company that owns the Tommy Hilfiger and Calvin Klein brands globally. Most of PVH’s earnings come from Europe, where the Tommy and Calvin brands are considered “almost luxury” and PVH has recorded high single digit organic growth with demonstrated pricing power. CEO Stefan Larsson has done an excellent job revitalizing the company and improving margins in PVH’s moribund US operations. A number of apparel stocks did well in Q4 and PVH benefitted from very strong fiscal Q3 earnings (reported Nov. 29, 2023) and increased share repurchases.”
PVH Corp. (NYSE:PVH) joins NIKE, Inc. (NYSE:NKE), Capri Holdings Limited (NYSE:CPRI), and Lululemon Athletica Inc. (NASDAQ:LULU) on our list of top luxury clothing stocks to invest in now.
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Disclosure. None. Top 11 Luxury Clothing Stocks to Invest in Now is originally published on Insider Monkey.
