In this article, we look at the top 11 luxury clothing stocks to invest in right now. In this article, we look at how Nike Inc. (NKE) stands in relation to other luxury clothing stocks to invest in right now.
Overview of Luxury Sector Trends
The luxury segment in retail is a major growth driver for the industry. Luxury goods are primarily seen as status symbols, encouraging discretionary spending among customers with high purchasing power.
According to a report by Mordor Intelligence, the luxury retail market is expected to be worth $110.13 billion in 2024 and grow to $151.32 billion by 2029, at a CAGR of 6.56%. The Asia-Pacific region is the fastest growing market in the luxury retail sector, although the largest market is still concentrated in Europe.
According to McKinsey’s “State of Fashion 2024” report, the global apparel industry is expected to see sales growth of 2% to 4% in 2024, with variations across countries and regions. As in past years, the luxury segment is expected to generate the largest economic gains.
However, companies in this sector may face a tough economic environment: growth is expected to slow to 3%-5% in 2024, compared with 5%-7% in 2023, as the post-pandemic shopping rush slows. However, these growth trends may be in contrast in Europe and the United States: growth is expected to slow in China and Europe, but accelerate in the United States after a relatively weak 2023.
Improvements in the distribution and supply chain of luxury apparel are some of the key growth drivers for the industry. For example, Saudi Arabia’s competition authority approved a joint venture between G Distribution BV 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 driving market growth.
First half of 2024 to be weak for luxury retailers
Several luxury brands experienced significant profit declines in the first half of 2024. While the market as a whole is struggling broadly, the main reason is that luxury brands have traditionally been heavily reliant on Chinese consumers. With China’s economy slowing and a more cautious consumer demographic, this heavy reliance is proving unprofitable as people cut back on spending on luxury goods. China’s economic slowdown has been attributed to factors including falling land sales, an aging population and declining exports.
Despite the challenges, some brands have made great strides, such as Italian luxury women’s clothing and accessories brand Miu Miu, which grew nearly 60 percent last year and 90 percent in the first quarter of this year, helping boost sales for its parent company, the Prada Group.
The luxury market has historically recovered from downturns, and many in the industry are hopeful that the current difficulties will be temporary. Luxury brands are relatively insulated from economic conditions because most of their purchases are made by a very small, elite consumer base.
Our Methodology
In this article, we have compiled a list of about 20 high-end stocks that are likely to experience analysts’ expected price increases and ranked the list using that as our primary criterion. We selected the top 11 stocks with the highest average analyst price targets as of September 12, 2024. For stocks not listed on a US exchange, we manually calculated analysts’ expected price increases. We also considered hedge fund sentiment toward each stock as a secondary criterion, taking data from the Insider Monkey database of over 900 elite hedge funds as of the second quarter of 2024.
Why are we interested in hedge fund concentrated stocks? The reason is simple: our research shows that you can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter strategy selects 14 small and large stocks each quarter, and has returned 275% since May 2014, beating the benchmark by 150 percentage points (more details here).
Top 11 luxury clothing stocks to invest in now
Nike, Inc. (NYSE:NKE)
Analyst upside potential as of September 12, 2024: 17.21%
Number of hedge funds as of Q2 2024: 66
Nike (NYSE:NKE) is a premium retailer that designs, sells and distributes sportswear, footwear, accessories, equipment and services for fitness activities. The company sells sports and fitness collections under several brands, including Nike, Jordan Brand and Converse. The company also specializes in casual apparel, footwear and accessories, which it distributes and licenses under the All Star, Chuck Taylor, Star Chevron, One Star and Jack Purcell trademarks.
Nike (NYSE: NKE) revenues grew about 1% in fiscal 2024, while EPS grew 15%. The company implemented several strategic shifts over the past year, including organizational and leadership changes, building out its ability to invest in consumer activities, and launching a multi-year innovation cycle. But above all else, Nike (NYSE: NKE) is focused on sport. The company is expanding innovation and newness to differentiate its brand and build momentum in its product portfolio.
Nike (NYSE: NKE) has operated Express Lane for many years, enabling short lead time replenishment and hyperlocal design. The company plans to continue to leverage Express Lane to build new ways of working across the entire product development process. The company now calls it Speed Lane and has integrated it as a company-wide effort to use resources to accelerate design, use advanced digital tools to expedite development, and leverage key manufacturing partners to expedite product production and testing. Speed Lane is expected to deliver innovations in the second half of the fiscal year, highlighting Nike’s (NYSE: NKE) efforts to build momentum and solidify its market position for the long term. The company also plans to leverage Speed Lane to roll out several new fitness and lifestyle franchises to expand its customer base.
Nike (NYSE:NKE) also plans to reinvest approximately $1 billion in consumer activities in fiscal 2025. The investment is expected to drive strong growth for the company by increasing merchandising, design and product development resources in key sports verticals. It will also accelerate the company’s expansion in key cities, increase brand differentiation in brick-and-mortar stores and drive bolder, larger-scale brand campaigns, starting with the Paris Olympics and EC ’24.
The Mar Vista Focus strategy stated the following about NIKE, Inc. (NYSE:NKE) in its Q1 2024 investor letter:
“Nike, Inc. (NYSE:NKE) received mixed reviews recently. Revenue was in line and profits beat expectations, but shares fell after management offered a cautious outlook for fiscal 2025. The company is currently in the midst of an internal restructuring and product line adjustment that is expected to result in flat revenue in the first half of next fiscal year. However, this transition is intended to position Nike for long-term success.
“Our conviction in Nike remains high and, despite the soft revenue outlook, we expect the company to emerge as a stronger, more competitive company once the restructuring is complete. Nike expects revenue to grow approximately 10% in 2024, accelerating to 15% in 2025 as operational execution normalizes.”
Overall, NKE ranks #9 out of the top 11 luxury clothing stocks to invest in now. While we see potential in luxury clothing companies, we believe AI stocks have a better chance of delivering higher returns in a shorter time frame. If you’re looking for AI stocks that are more promising than NKE but trade at less than 5x NKE, check out our report on the cheapest AI stocks.
Read next: The $30 Trillion Opportunity: The 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and NVIDIA Has “Become a Wasteland” According to Jim Cramer.
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