In this article, we will take a look at the top 10 luxury clothing stocks to buy. To see more such companies, go directly to Top 5 Luxury Clothing Stocks to Buy.
The luxury goods market is famous for staying resilient and strong during recessionary environments. That’s because the rich and wealthy are usually the last to feel the real effects of rising inflation. Last year, when the broader turmoil in the stock market was crushing almost every other company, French luxury giant LVMH Moet Hennessy Louis Vuitton SE (EPA:MC) was posting strong sales growth. During the company’s third quarter earnings call, answering a question about how the company was able to manage to outperform despite the difficult odds, LVMH’s CFO Jean-Jacques Guiony very realistically pointed to a fact that explains the strength of the luxury goods market even when things start to go south:
“Luxury is not a proxy for the general economy. We end up selling to affluent people and they have a behavior on their own, which is not necessarily totally aligned with economics.”
During the last quarter of 2022, LVMH, along with some other luxury companies, saw a slowdown, mainly driven by COVID-19 outbreaks in China. LVMH’s fashion and leather goods division posted organic sales growth of 10% during the period, which the company says was the slowest growth seen during 2022. However, the company said it started to see sales rebound in January 2023 after China reopened its economy. Jean-Jacques Guiony said the company’s performance in China had “recovered very significantly” in January and that “China has actually turned the page on the disruption of the pandemic.”
How Does Luxury Business Remain Resilient Despite Inflation?
Luxury companies like PVH Corp. (NYSE:PVH), Tapestry, Inc. (NYSE:TPR) and Capri Holdings Limited (NYSE:CPRI) aren’t totally immune to the economic realities, however. For example, LVMH’s chief Bernard Arnault said earlier this year that the company was “vigilant to current uncertainties.” But what makes the luxury sector strong in the face of global economic challenges is its ability to transfer rising costs to consumers. A December 2022 report from Financial Times says the prices of core handbags from Chanel and Louis Vuitton have jumped about 20% over the past two years, with more price hikes expected, especially in Europe. The report cited Citi luxury analyst Thomas Chauvet, who estimates that prices could rise by another 15% in 2023 in Europe and in the mid-single digits in the US and China.
Another growth catalyst for the luxury sector comes from the emerging markets where wealth and consumers’ appetite to buy and boast luxury items keep increasing. Bain estimates that sales in the sector are expected to increase by a whopping 60% between 2022 and 2030, driven by the increase in luxury consumers from India, Mexico, South Korea and south-east Asia.
The Benefits of Having The Top 1% As Customers
Global wealth increase that seems to buoy the top 1% also explains the robust growth of the luxury goods market. Bloomberg in a reported quoted data from Boston Consulting Group, which says that global wealth jumped 10.6% (adding $26 trillion) in 2021, clocking in the fastest rate in more than a decade. The coronavirus crisis also fueled consumer spending in the luxury goods market. The Bloomberg report cited Gachoucha Kretz, associate marketing professor at business school HEC Paris, who pointed to a trend he calls “revenge shopping” after the pandemic, in which consumers spend lavishly on the assumption that “life is short” and “‘I might as well enjoy today since I don’t know what’s going to happen tomorrow.’”
In this backdrop, it’s necessary to take a look at the top luxury clothing companies in which hedge funds are investing.
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Our Methodology
For this article, we scanned the holdings of 943 hedge funds tracked by Insider Monkey and picked top 10 companies that make luxury clothing products. These are the most popular luxury apparel stocks among the elite hedge funds. Some of the notable names you will see in the list are PVH Corp. (NYSE:PVH), Tapestry, Inc. (NYSE:TPR) and Capri Holdings Limited (NYSE:CPRI).
Top 10 Luxury Clothing Stocks to Buy
10. Ermenegildo Zegna N.V. (NYSE:ZGN)
Number of Hedge Fund Holders: 10
Italian luxury fashion company Ermenegildo Zegna N.V. (NYSE:ZGN) ranks 10th in our list of the top luxury clothing stocks to buy now. Over the past six months Ermenegildo Zegna N.V. (NYSE:ZGN) has gained about 21%. Ermenegildo Zegna N.V. (NYSE:ZGN) recently posted its full fiscal year results. Revenue in the period jumped about 15.5% to reach €1.49 billion, in-line with Ermenegildo Zegna N.V. (NYSE:ZGN)’s mid-teens guidance. Ermenegildo Zegna N.V. (NYSE:ZGN) posted double digit growth for both Zegna and Thom Browne segments.
As of the end of the fourth quarter of 2022, 10 hedge funds tracked by Insider Monkey had stakes in Ermenegildo Zegna N.V. (NYSE:ZGN).
9. G-III Apparel Group, Ltd. (NASDAQ:GIII)
Number of Hedge Fund Holders: 16
Apparel company G-III Apparel Group, Ltd. (NASDAQ:GIII) ranks 9th in our list of the top luxury clothing stocks to buy. In 2021, G-III Apparel Group, Ltd. (NASDAQ:GIII) acquired European luxury fashion brand Sonia Rykiel.
As of the end of the last quarter of 2022, 16 hedge funds tracked by Insider Monkey held stakes in G-III Apparel Group, Ltd. (NASDAQ:GIII). The biggest stakeholder of G-III Apparel Group, Ltd. (NASDAQ:GIII) is Madison Avenue Partners of Eli Samaha which owns a $26 million stake in the company.
In March, G-III Apparel Group, Ltd. (NASDAQ:GIII) posted Q4 results. Adjusted EPS in the period came in at $0.41, missing estimates by $0.03. Revenue in the quarter increased by 14.2% year over year to total $854.43 million, beating estimates by $85.15 million. For the first quarter of fiscal 2024, G-III Apparel Group, Ltd. (NASDAQ:GIII) expects net sales of $560 million, versus the consensus estimate of $694.88 million.
For FY’2024, net sales are expected to total $3.23 billion, better than the consensus estimate of $3.17 billion.
FPA Queens Road Small Cap Value Fund made the following comment about G-III Apparel Group, Ltd. (NASDAQ:GIII) in its Q4 2022 investor letter:
“G-III Apparel Group, Ltd. (NASDAQ:GIII) is an apparel manufacturer that licenses the Tommy Hilfiger and Calvin Klein women’s and other categories in the U.S. and owns the Donna Karan, Karl Lagerfeld and a stable of smaller brands globally. Shares collapsed after Q3 2022 earnings when the company announced that Tommy and Calvin’s owner, PVH (which the Fund also owns), was in sourcing the licensing arrangement. We had considered this possibility and owned G-III in smaller size. G-III remains cheap but with lingering questions about the license transition, bloated inventory and the quality of the fully owned brands.”
8. V.F. Corporation (NYSE:VFC)
Number of Hedge Fund Holders: 25
V.F. Corporation (NYSE:VFC) is one of the biggest apparel companies in the world. V.F. Corporation (NYSE:VFC) sells various products via several brands, some of which are high-end and could be counted in the luxury category. Some of the notable brands of V.F. Corporation (NYSE:VFC) include Vans, Timberland, Dickies, and The North Face.
As of the end of the fourth quarter of 2022, 25 hedge funds tracked by Insider Monkey had stakes in V.F. Corporation (NYSE:VFC). The net worth of these stakes was $449 million. The biggest stakeholder of V.F. Corporation (NYSE:VFC) is Ken Griffin’s Citadel Investment Group which owns a $50.5 million stake in the company.
Diamond Hill Large Cap Strategy made the following comment about V.F. Corporation (NYSE:VFC) in its Q4 2022 investor letter:
“Apparel and footwear company V.F. Corporation (NYSE:VFC)’s stock declined in Q4 after management lowered guidance based on weaker-than-expected demand in North America, higher promotions and elevated wholesale order cancellations. The company also announced a CEO transition, effective immediately. Following these developments, we sold our shares in favor of higher conviction ideas.”
7. Nordstrom, Inc. (NYSE:JWN)
Number of Hedge Fund Holders: 27
Nordstrom, Inc. (NYSE:JWN) is a luxury department store chain that also sells high-end designer clothing products for men and women. As of the end of the fourth quarter of 2022, 27 hedge funds tracked by Insider Monkey had stakes in Nordstrom, Inc. (NYSE:JWN), up from 31 hedge funds in the previous quarter. The most significant stakeholder of Nordstrom, Inc. (NYSE:JWN) is John Overdeck and David Siegel’s Two Sigma Advisors which owns a $21 million stake in the company.
In March, Argus upped Nordstrom, Inc. (NYSE:JWN) to Buy from Hold. The firm said it sees a stock price upside despite weaker economic conditions, unproductive inventory, and soft sales to lower-income customers.
The firm’s analyst highlighted that Nordstrom, Inc. (NYSE:JWN) has divested unprofitable businesses and reduced unwanted inventory through discounts and promotions.
6. Ralph Lauren Corporation (NYSE:RL)
Number of Hedge Fund Holders: 30
Ralph Lauren Corporation (NYSE:RL) is one of the world’s notable fashion companies that has a variety of luxury offerings. In February, BofA analyst Christopher Nardone upgraded Ralph Lauren Corporation (NYSE:RL) to Buy with a $145 price target. During the same month, UBS shared its screen of top dividend stocks picked up by its machine learning model. Ralph Lauren Corporation (NYSE:RL) made it to the list. The firm said that its screen has “outperformed 5.5% over the last 6 months and despite the market rotations and rally has remained relatively resilient over the last month underperforming by ~1.5%.”
A total of 30 hedge funds tracked by Insider Monkey were bullish on Ralph Lauren Corporation (NYSE:RL) as of the end of the fourth quarter of 2022. The biggest shareholder of Ralph Lauren Corporation (NYSE:RL) was Alexander Roepers’ Atlantic Investment Management which owns a $26.3 million stake in the company. Some other luxury stocks preferred by hedge funds include PVH Corp. (NYSE:PVH), Tapestry, Inc. (NYSE:TPR) and Capri Holdings Limited (NYSE:CPRI).
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Disclosure: None. Top 10 Luxury Clothing Stocks to Buy is originally published on Insider Monkey.
