Admin September 27, 2024
In this article we will look at the 11 Best Fashion Stocks To Buy Now. Let’s look at where Skechers USA, Inc. (SKX) 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).
11 Best Fashion Stocks to Buy Now
Skechers USA, Inc. (NYSE:SKX)
No. of Hedge Funds as of Q2 2024: 45
Skechers (NYSE:SKX) designs, manufactures, and markets a wide range of apparel, footwear, and accessories for women, men, and children. It operates through two segments: Direct-to-Consumer and Wholesale. The Direct-to-Consumer segment encompasses product sales made directly by the company to consumers via a combination of channels. These include company-owned e-commerce sites, Skechers-branded stores, digital platforms, and third-party marketplaces.
The Wholesale segment covers sales to a network of partners. These include family shoe stores, specialty athletic and sporting goods retailers, Skechers-branded stores operated by licensees and third-party franchises, big box club stores, department stores, and distributors in particular international markets.
The company’s lifestyle offering manufactures and markets comfort technologies, including Skechers Ai-Cooled Memory Foam, Skechers Arch Fit, Skechers Hands-Free Slip-ins, and others. Sales in Q2 2024 grew by 7.2% to $2.16 billion as compared to last year, making a sales record for the period. This growth translates to an increase of $145 million. It also announced a new $1 billion share repurchase plan, significantly enhancing and replacing its current program. Skechers (NYSE:SKX) boasts a solid operation model, as it was able to drive growth by overruling hurdles such as supply chain disruptions affecting shipments to Europe, a price-driven 618 shopping event in China, and foreign currency headwinds.
Another key reason behind its growth is the strong global demand for the company’s innovative and comfortable products. These products resonated with customers of all ages and interests, driving growth in all segments and regions. The company partnered with industry technology leaders like Goodyear to further diversify and innovate its product offering, and announced a new partnership with John Deere along with a new Skechers football campaign with a team of athletes. It is driving purchase intent and brand awareness by increasing its global product offering. In addition, Skechers (NYSE:SKX) is also focusing on building efficiencies within our business to scale profitable growth.
45 hedge funds hold stakes in the stock, with Anomaly Capital Management holding the highest stake, worth $199.33 million, as of Q2 2024. It ranks fifth on our list of the 11 best fashion stocks to buy now.
Meridian Growth Fund made the following comment about Skechers U.S.A., Inc. (NYSE:SKX) in its Q4 2022 investor letter:
“Skechers U.S.A., Inc. (NYSE:SKX), designs and sells lifestyle and athletic footwear. It is the third-largest footwear company in the U.S. and has a strong and growing international presence. In our view, the market does not fully recognize the growth opportunity represented by Skechers’ international business. During the quarter, the company reported strong gains worldwide, led by a 48% increase in sales in the EMEA region and a 9% rise in the APAC region despite COVID-related slowdowns, as well as 16% growth in the Americas, powered by healthy demand in the U.S. and Canada. The company is still contending with some expense issues, primarily related to ongoing supply chain and distribution channel challenges, but investors are increasingly recognizing management’s success at managing through the issues and setting the company up for potentially strong cash flow growth in 2023. Amid the growing optimism, we maintained our position in the stock.”
Overall, SKX ranks fifth 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 SKX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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