12 Best Clothing Stocks To Buy Now

Published on November 23, 2022 at 2:20 pm by Hamna Asim in Hedge Funds, News

In this article, we discuss 12 best clothing stocks to buy now. If you want to see more stocks in this selection, check out 5 Best Clothing Stocks To Buy Now.

According to The Business Research Company, the global apparel market climbed from $551.36 billion in 2021 to $606.19 billion in 2022 at a compound annual growth rate (CAGR) of 9.9%. In the near-term, the Russia-Ukraine war hindered the chances of global economic recovery from the COVID-19 pandemic. The apparel market is now forecasted to grow to $768.26 billion in 2026 at a CAGR of 6.1%.

Despite widespread labor tightness and supply chain constraints, the fashion and apparel industry recorded $180.5 billion in ecommerce revenue in 2021, up from $145 billion in 2020. Growth estimates for fashion e-commerce revenue in 2022 came in at $205 billion. Some of the biggest clothing companies like Gucci, Chanel, and Louis Vuitton have brand values worth billions of dollars, and loyal customers around the world. Western Europe was the largest region in the apparel market in 2021, with Asia Pacific being the second largest.

Some of the best clothing stocks that investors can monitor include The TJX Companies, Inc. (NYSE:TJX), Lululemon Athletica Inc. (NASDAQ:LULU), and NIKE, Inc. (NYSE:NKE).

Our Methodology

We selected the following clothing stocks based on positive analyst coverage, strong business fundamentals, and future growth prospects. We have assessed the hedge fund sentiment from Insider Monkey’s database of 920 elite hedge funds tracked as of the end of the third quarter of 2022.

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Best Clothing Stocks To Buy Now

12. Urban Outfitters, Inc. (NASDAQ:URBN)

Number of Hedge Fund Holders: 21

Urban Outfitters, Inc. (NASDAQ:URBN) is a Pennsylvania-based company that operates Urban Outfitters stores, which offer women’s and men’s fashion apparel, activewear, footwear, accessories, home goods, electronics, and beauty products. On November 21, Urban Outfitters, Inc. (NASDAQ:URBN)’s net sales for the third quarter rose 3.9% compared to the prior-year quarter to $1.18 billion. Meanwhile, the Q3 EPS of $0.40 fell short of analysts’ estimates by $0.02.

On November 21, BofA analyst Lorraine Hutchinson raised the price target on Urban Outfitters, Inc. (NASDAQ:URBN) to $30 from $25 and maintained a Buy rating on the shares after the company’s Q3 EPS exceeded her estimate and management guided to low-single digit percentage Q4 sales growth. Two of Urban Outfitters, Inc. (NASDAQ:URBN)’s three brands are “holding up very well in a tough environment” and she forecasts the company’s supply chain to allow for a quicker return to aligned inventory, giving her more confidence in her FY24 estimates, the analyst told investors.

According to Insider Monkey’s data, 21 hedge funds were bullish on Urban Outfitters, Inc. (NASDAQ:URBN) at the end of Q3 2022, with collective stakes worth $64.5 million, compared to 21 funds in the prior quarter worth $70 million. John Overdeck and David Siegel’s Two Sigma Advisors is the largest stakeholder of the company, with 1.07 million shares worth $21.12 million.

Like The TJX Companies, Inc. (NYSE:TJX), Lululemon Athletica Inc. (NASDAQ:LULU), and NIKE, Inc. (NYSE:NKE), Urban Outfitters, Inc. (NASDAQ:URBN) is one of the premier clothing stocks to consider.

11. Victoria’s Secret & Co. (NYSE:VSCO)

Number of Hedge Fund Holders: 24

Victoria’s Secret & Co. (NYSE:VSCO) is an American specialty retailer of women’s intimate, personal care, and beauty products worldwide. The company offers sleepwear, loungewear, athletic attire, and swimwear. On October 12, Victoria’s Secret & Co. (NYSE:VSCO) said it estimates Q3 operating income to be towards the high end of its prior guidance range of $10 million to $40 million and the EPS is estimated to be towards the high end of the prior guidance range of $0.00 to $0.25, which means it will potentially outperform the consensus of $0.14. The management said it is positioned to deliver sustainable long-term sales growth, significant free cash flow, and mid-teens operating margin rates over time. Victoria’s Secret & Co. (NYSE:VSCO) is one of the best clothing stocks to invest in.

On November 1, Victoria’s Secret & Co. (NYSE:VSCO) announced that it has signed a definitive agreement to acquire Adore Me, a digitally-native intimates brand, in a deal worth $400 million. This acquisition will be a meaningful accelerant as Victoria’s Secret & Co. (NYSE:VSCO) moves towards growth and modernizes its business model, putting technology at the forefront of operations.

According to the third quarter database of Insider Monkey, 24 hedge funds held stakes worth $430.8 million in Victoria’s Secret & Co. (NYSE:VSCO), compared to 24 funds in the prior quarter worth $438.3 million. Snehal Amin’s Windacre Partnership is the biggest position holder in the company, with 7.5 million shares worth about $220 million.

10. The Gap, Inc. (NYSE:GPS)

Number of Hedge Fund Holders: 25

The Gap, Inc. (NYSE:GPS) is a California-based apparel retail company that provides clothes, accessories, and personal care products for men, women, and children under the Old Navy, Gap, Banana Republic, and Athleta brands. On November 17, The Gap, Inc. (NYSE:GPS) reported a Q3 non-GAAP EPS of $0.71 and a revenue of $4.04 billion, topping Wall Street estimates by $210 million. Online sales increased 5% compared to last year and represented 39% of total net sales.

On November 21, Deutsche Bank analyst Gabriella Carbone raised the price target on The Gap, Inc. (NYSE:GPS) to $11 from $8 and reiterated a Hold rating on the shares. The Gap, Inc. (NYSE:GPS) reported Q3 results that exceeded Street estimates with a better than anticipated top and bottom-line performance, the analyst wrote in a research note.

According to Insider Monkey’s data, 25 hedge funds were bullish on The Gap, Inc. (NYSE:GPS) at the end of the third quarter of 2022, compared to 27 funds in the prior quarter. The collective stakes held by elite hedge funds in Q3 amounted to $255.4 million, up from $234.3 million in Q2 2022. Richard S. Pzena’s Pzena Investment Management is the largest position holder in the company, with 11.7 million shares worth $96.3 million.

9. Abercrombie & Fitch Co. (NYSE:ANF)

Number of Hedge Fund Holders: 26

Abercrombie & Fitch Co. (NYSE:ANF) is an American specialty retailer offering apparel, personal care products, and accessories for men, women, and children under the Hollister, Abercrombie & Fitch, Abercrombie Kids, Moose, Seagull, Gilly Hicks, and Social Tourist brands. On November 22, Abercrombie & Fitch Co. (NYSE:ANF) posted a Q3 non-GAAP EPS of $0.01 and a revenue of $880.08 million, outperforming Wall Street consensus by $0.13 and $48.91 million, respectively. The company’s double-digit sales growth at the core Abercrombie & Fitch brand offset slowing sales trends at the Hollister brand.

JPMorgan analyst Matthew Boss on October 31 maintained a Neutral rating on Abercrombie & Fitch Co. (NYSE:ANF) but trimmed the price target on the shares to $17 from $20 ahead of the Q3 results.

According to Insider Monkey’s Q3 data, 26 hedge funds were bullish on Abercrombie & Fitch Co. (NYSE:ANF), compared to 22 funds in the earlier quarter. Dmitry Balyasny’s Balyasny Asset Management is the biggest stakeholder of the company, with 1.8 million shares worth $28 million.

8. American Eagle Outfitters, Inc. (NYSE:AEO)

Number of Hedge Fund Holders: 27

American Eagle Outfitters, Inc. (NYSE:AEO) is a specialty retailer that provides clothing, accessories, and personal care products under the American Eagle and Aerie brands. On November 22, American Eagle Outfitters, Inc. (NYSE:AEO) reported Q3 GAAP earnings per share of $0.42 and a revenue of $1.24 billion, exceeding Wall Street estimates by $0.21 and $30 million, respectively. The stock rose over 14% after posting stronger than expected profits and lower inventory overhang.

On September 16, JPMorgan analyst Matthew Boss raised the price target on American Eagle Outfitters, Inc. (NYSE:AEO) to $13 from $12 and maintained a Neutral rating on the shares. The analyst established December 2023 price targets across his coverage. Consumer and retail CEOs remain “tempered” on second half of 2022 expectations due to the tough macroeconomic environment, but nearly every company demonstrated signs of “improvement” in August relative to the June trough, the analyst told investors in a research note.

According to Insider Monkey’s data, 27 hedge funds were long American Eagle Outfitters, Inc. (NYSE:AEO) at the end of Q3 2022, compared to 29 funds in the prior quarter. Gavin Baker’s Atreides Management is the largest stakeholder of the company, with 3.7 million shares worth $36.7 million.

7. Boot Barn Holdings, Inc. (NYSE:BOOT)

Number of Hedge Fund Holders: 31

Boot Barn Holdings, Inc. (NYSE:BOOT) is a California-based lifestyle retail chain that operates specialty retail stores in the United States. The company’s specialty retail stores offer western and work-related footwear, apparel, and accessories for men, women, and kids. It is one of the best clothing stocks to invest in.

On October 27, Baird analyst Jonathan Komp reaffirmed an Outperform rating on Boot Barn Holdings, Inc. (NYSE:BOOT) but trimmed the price target on the shares to $75 from $80. The analyst said management conveyed a confident outlook driven by ongoing robust execution, though with October-to-date comps decelerated to -1.3%, which meaningfully reflect a drop in lower-margin online sales, they lowered FY2023 EPS guidance.

According to Insider Monkey’s data, 31 hedge funds were bullish on Boot Barn Holdings, Inc. (NYSE:BOOT) at the end of September 2022, compared to 34 funds in the preceding quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP held the biggest position in the company, comprising 878,872 shares worth $51.3 million.

Here is what Wasatch Small Cap Growth Fund has to say about Boot Barn Holdings, Inc. (NYSE:BOOT) in its Q4 2021 investor letter:

“The top contributor to Fund performance for the fourth quarter was Boot Barn Holdings, Inc. (BOOT)—a specialty retailer offering increasingly popular Western and work-related apparel, footwear and accessories. Boots are somewhat resistant to online competition because they often require specialized fitting. The company has benefited from its economies of scale and multi-channel business model, which have kept revenues flowing during virus-related shutdowns. Stimulus payments by the federal government to consumers have helped as well. Boot Barn’s private-label brands, built around well-known personalities in the music business, have enabled the company to convert higher portions of its revenues into bottom-line profits. For most of the period since March 2020, Boot Barn’s stock rallied on these positive conditions—and this rally continued in the fourth quarter. We consider Boot Barn’s management to be excellent, and we’ve continually added to our position on periodic price weakness within the context of an overall upward trajectory in the stock.”

6. Tapestry, Inc. (NYSE:TPR)

Number of Hedge Fund Holders: 40

Tapestry, Inc. (NYSE:TPR) is a New York-based company that provides luxury accessories and branded lifestyle products in the United States, Japan, Greater China, and internationally. The company operates through three segments – Coach, Kate Spade, and Stuart Weitzman. It is one of the premier clothing stocks to monitor. Tapestry, Inc. (NYSE:TPR) reported market-beating Q3 results.

On November 17, Tapestry (NYSE:TPR) declared a quarterly dividend of $0.30 per share, in line with previous. The dividend is payable on December 27, to shareholders of record on December 9. The dividend yield on November 23 came in at 3.31%.

Citi analyst Paul Lejuez on November 14 maintained a Buy rating on Tapestry (NYSE:TPR) but lowered the firm’s price target on the shares to $40 from $42. The company’s Q1 results were about in line with expectations, though revenues in North America were light, the analyst told investors in a research note.

Among the hedge funds tracked by Insider Monkey, 40 funds reported owning stakes worth $637.3 million in Tapestry (NYSE:TPR) at the end of Q3 2022, compared to 36 funds in the prior quarter worth $535.2 million. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital held the largest stake in the company, with 3.6 million shares valued at $104.35 million.

Like The TJX Companies, Inc. (NYSE:TJX), Lululemon Athletica Inc. (NASDAQ:LULU), and NIKE, Inc. (NYSE:NKE), Tapestry (NYSE:TPR) is one of the clothing stocks backed by elite hedge funds.

Here is what Ariel International & Ariel Global Fund has to say about Tapestry, Inc. (NYSE:TPR) in its Q3 2021 investor letter:

“Luxury accessory and lifestyle brand, Tapestry, Inc. was the top contributor to performance over the trailing one-year period. Revenue improvement across all three brands with a notable increase in consumer demand, particularly for the Coach business, triple-digit growth in e-commerce, and better than expected pricing, drove margins higher. Looking ahead, we expect Tapestry’s supply chain and SKU rationalization initiatives to continue to deliver margin expansion. Together, with early signs of improved receptivity for the Kate Spade brand, we believe a significant value creation opportunity lies ahead.”

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