In this article, we will look at the Top 11 Luxury Clothing Stocks to Invest in Now. In this article, we will look at where Hermes (HESAY) stands against other top luxury clothing stocks to invest in now.
Overall View of Trends in the Luxury Sector
The luxury segment in retail has been a prominent driver of growth in the industry. It is primarily considered a status symbol, driving discretionary spending among customers with high purchasing power.
According to a report by Mordor Intelligence, the luxury retail sector has a market size of $110.13 billion as of 2024, and is expected to grow to $151.32 billion by 2029, at a compound annual growth rate of 6.56%. While the Asia-Pacific region is the fastest-growing market in the luxury retail domain, the largest market remains concentrated in Europe.
According to McKinsey’s The State of Fashion 2024 report, the global apparel industry is expected to experience top-line growth of 2%- 4% in 2024, with variations possible in countries and regions. Quite like in previous years, the luxury segment is anticipated to generate the most significant economic profit.
However, companies in the sector may experience a tough economic environment. Growth is anticipated to slow down to 3%- 5% in 2024 compared to 5%- 7% in 2023 as the post-pandemic shopping rush slows down. However, these growth trends are likely to be contrasting in Europe and the US. While growth is set to slow in China and Europe, it is expected to pick up speed in the US after a relatively weak 2023.
Distribution of luxury apparel and improved supply chains are some of the industry’s significant growth drivers. For example, Saudi Arabia’s General Authority for Competition approved the joint venture between G Distribution B.V. 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, in turn, driving market growth.
A Slow First Half of 2024 for Luxury Retailers
Several luxury retailers experienced substantial profit drops in the first half of 2024. The overall market is experiencing widespread struggles, primarily because luxury brands have traditionally relied heavily on Chinese consumers. With the slowing Chinese economy and a cautious consumer base, this heavy reliance is proving unprofitable, as people are reducing their spending on luxury goods. The economic slowdown in China is attributed to factors such as lower land sales, an aging population, and decreased exports.
Despite the challenges, some brands made significant strides, such as the Italian high-fashion women’s clothing and accessory brand Miu Miu, which saw nearly 60% growth last year and 90% growth in the first quarter of this year. This helped its parent company, Prada Group, increase its sales as well.
The luxury market has historically bounced back from downturns, and many in the industry hope the current challenges are temporary. Luxury brands are comparatively less affected by economic conditions as most of their purchases are made by a very small group of elite consumers.
Our Methodology
For this article, we made a list of nearly 20 luxury stocks with positive analyst upside potential and used that as our primary metric to rank the list. We chose the top 11 stocks with the highest average analyst price target as of September 12, 2024. We manually calculated analyst upsides for stocks not listed on American exchanges. We have also considered the hedge fund sentiment around each stock as a secondary metric, and sourced data from Insider Monkey's database of over 900 elite hedge funds as of Q2 2024.
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).
Top 11 Luxury Clothing Stocks to Invest in Now
Top 11 Luxury Clothing Stocks to Invest in Now
Hermes (OTC:HESAY)
Analyst Upside Potential as of September 12, 2024: 17.44%
No. of Hedge Funds as of Q2 2024: N/A
Hermes (OTC:HESAY) is a France-based company that specializes in the design, manufacture, and marketing of luxury products. It operates its business through multiple segments, including Leather and Saddler, Ready-to-wear and Accessories, and Other Hermes, which includes jewelry and Hermes home products. The Other product segment also includes production activities that are held on behalf of non-group brands, as well as the John Lobb, Puiforcat, Saint-Louis, and Shang Xia products. It also manufactures the globally popular Birkin bags, which are not put on display in its stores and are only available to an elite segment of its consumers. Although the company is centered in France, Hermes International SCA manages operations in other countries in Europe, Asia, and the Americas, among others.
It recently reopened its renovated store in Melbourne, Australia, along with a renovated and expanded store in Nantes, an expanded store in Hong Kong, and a new store in Mitsukoshi Ginza, Tokyo, between June and September 2024. Hermes (OTC:HESAY) also reinforced its position in Mumbai, India, by opening a new store in April. Since the beginning of 2024, the company has regularly expanded its market presence by opening new stores and renovating and expanding previously existing ones.
Hermes (OTC:HESAY) is also continuing to invest in its production capacity, highlighting its strong plans for growth and increased profitability. On September 13, the company inaugurated its 23rd leather goods workshop in a completely renovated industrial heritage building in Riom, France, creating 280 local jobs in the process.
According to its half-year 2024 report, the Group’s consolidated revenue reached €7.5 billion, growing by 15% at constant exchange rates. All geographical areas experienced double-digital growth. Asia, excluding Japan, underwent a 10% growth in all countries of the region, while the Americas and Europe, excluding France, experienced growth of 13% and 18%, respectively. Japan’s local clients led a 22% growth, while France’s reached 15% due to customer loyalty and dynamic tourist flows.
Sales in the second quarter reached €3.7 billion, growing 13% at constant exchange rates and showing the company’s increasing profitability. Despite the challenging macroeconomic conditions, the loyalty of customers worldwide drove momentum across all regions except Asia, which was affected by an inflection in Greater China’s traffic. Hermes (OTC:HESAY) has a unique business model and is pursuing its long-term development strategies that build on maintaining control over know-how and boosting creativity.
Overall, HESAY ranks eighth among the top 11 luxury clothing stocks to invest in now. While we acknowledge the potential of luxury clothing 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 HESAY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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