To the fashion-forward investors! If you’re looking to upgrade your investment game with a touch of style, you’ve come to the right place…
We’ve decided to strut down the stock market runway, exploring the crème de la crème of London-listed and European apparel stocks, providing an insight into recent performance and current demand trends.
The industry was hit hard by the pandemic, but with spending remaining somewhat resilient despite sticky inflation — especially in the luxury category — now could be a good time to find some bargains.
Here are the top clothing stocks that are turning heads in the market:
1. ASOS (ASC) – Dressing for Success
ASOS, the trailblazer of online fashion retail, is not the most obvious name on the list, and we definitely had second thoughts about including it.
The company is dealing with a few headwinds, including a stretched balance sheet due to the recent financing and equity raise, a decline in demand over the last year or so, and the fact it is going through a transformation.
However, the London-listed firm, which was once considered a gem, could be one for bargain hunters, especially as consumer sentiment shifts more positively.
The company is now focusing on profitability and returned to profit in it the three months to May as its “driving change agenda kicks in.”
One of its areas of focus is investing in customer acquisition, and while there is yet to be a confirmed turnaround in demand, recent web traffic trends suggest a potential turnaround.
In addition, short interest in the stock has fallen significantly in the last few months. While investing in Asos at this time can be considered more speculative, at current levels, it definitely looks like one to watch.
2. H&M (HM B) – Affordable Fashion
Next, we stroll along the high streets with H&M, the Swedish sensation beloved by budget-conscious shoppers.
The Nasdaq Stockholm listed company’s shares have had a solid 2023 so far, up well over 40%.
H&M stock also jumped recently after revealing that Q2 profits topped estimates due to cost-cutting measures and its summer collection benefitting from the warmer weather in Europe.
While Google Search trends are relatively subdued, web traffic, according to Semrush, continues to trend higher for one of the world’s largest fashion retailers.
H&M, which has also gained favour with some consumers due to its focus on sustainability, has also benefitted from its progress in clearing out excess inventory.
3. Burberry (BRBY) – Where Luxury Meets Legacy
For those seeking to invest in luxury, look no further than Burberry, the quintessential British fashion icon.
A premium brand with a knack for staying relevant, Burberry has mastered modern marketing and captivated younger audiences with strategic collaborations and savvy social media campaigns.
Luxury, even during economic downturns and high inflation, remains somewhat resilient as consumers in that category are less impacted by the macroeconomic conditions impacting others.
Sales in China — which is a big market for the brand — are on the rise, although US demand fell. Still, web traffic remains near highs, and the company is in a good position. There are some near-term headwinds that investors should assess, but we think it is one to consider.
4. Frasers Group (FRAS) – Big Spenders
The fashion group has been on a spending spree this year, snapping up shares and adding to stakes in companies such as Next, Boohoo, and the previously mentioned Asos.
In its results for the year ended April 30, the company reported a rise in revenue, with reported profit before tax surging an impressive 96.9% year-on-year.
FRAS expects further profit progress in FY24 and FY23 as its “momentum continues,” benefitting from brand relationships with key partners. As well as the investments mentioned above, Frasers has stakes in other brands such as Hugo Boss, Mulberry, AO World, and Curry’s, providing investors with a chance to gain exposure to a plethora of retailers without the risk of buying each individually.
Frasers’ shares are gaining momentum, and the company is working on expanding further in Europe and Asia. For investors looking at a way to play a broad range of retailers, FRAS is one to consider.
5. LVMH (MC, LVMHF) – The Fashion Empire
Finally, let’s bow down to LVMH, the French powerhouse that rules the luxury fashion and lifestyle universe.
LVMH boasts a star-studded lineup of iconic brands, including Louis Vuitton, Christian Dior, and Givenchy. Diversification across luxury goods has granted LVMH resilience in challenging times.
Of course, we need to consider that luxury spending in the US has slowed slightly recently, but the company is well-positioned due to the significant strength of its brand portfolio. While there may be some slight near-term headwinds, over the long term, LVMH has the potential to continue thriving.
Conclusion: As a savvy investor, remember to conduct thorough research and align your investments with your goals. Of course, trends may change, and it’s important to remain flexible. However, remember to focus on the companies best positioned to profit from the ever-changing fashion and retail landscape.
By James Fyeman