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Investing in fashion stocks

Fashion stocks and ETFs may be eye-catching, but the industry can be volatile.

It can be a luxurious venture, but you need to be a savvy investor. Here’s what you should know about the benefits and risks of investing in fashion stocks.

What are fashion stocks?

The fashion industry generally includes all companies that sell clothing, apparel, accessories, body products and anything you wear to presumably enhance your appearance. Apparel includes online and offline wholesalers and retailers that sell clothing, footwear and accessories.

Fashion has existed as a commodity for centuries. Think of kings and queens, and you’d conjure up images of luxurious robes, jewel-studded crowns and material objects that would make heads turn. The same may be said about today’s celebrities and other trendsetters, so some investors may find it lucrative to seek fashion stocks.

Why invest in fashion stocks?

The fashion industry involves many well-known brands. You hear these names on TV, the internet and across social media. They’re promoted by the biggest names in entertainment.

But the fashion industry isn’t limited to designer handbags and dresses. Think about how many clothing and apparel stores you walk by daily. How many have you been to either in person or online in the last year? After all, people need clothes.

In fact, a report by Statista projects the global apparel market to grow from $1.3 trillion in 2015 to about $1.5 trillion by 2020’s end.

But fashion stocks aren’t limited to clothing and accessories. They also include stocks of makeup companies. According to a report by Grand View Research, the global skincare products market was valued at $134.8 billion in 2018 and is projected to keep growing at a compound annual growth rate (CAGR) of 4.4% up until 2025. The study attributed most of this to the expanding cosmetics industry.

But you can also look at the smaller picture when considering investing in fashion stocks. It may give you an opportunity to invest in the products you buy or the brands you like. This isn’t necessarily a bad idea, but you have to carefully study those brands to make sure they’re performing consistently well. And here is where it can get tricky.

Risks of investing in fashion stocks

One of the biggest fashion stock risks may be volatility. Much of the fashion industry is driven by consumer tastes at any given time, which can be very unpredictable. A trend could be “in” today and “out” tomorrow. If companies can’t pivot and adapt quickly, profits will suffer.

Additionally, the fashion industry relies on outside factors. A celebrity seen wearing a particular brand can make sales skyrocket — which works if you’ve invested in that brand, but not if you’ve invested in its competitors. And political tensions between countries could impact the exports of raw materials used to make clothing and footwear (like cotton, wool, silk and other fabrics).

Consumer backlash is yet another highly volatile factor. While the fashion industry has many devotees, it also has plenty of criticism for the ethically questionable practices of certain brands and companies. Controversies that catch widespread attention include the use of real fur, animal testing in the cosmetic industry and fashion marketing tactics that appear to discriminate against certain body types or ethnic groups.

Too much controversy or a company’s failure to effectively handle criticism can hurt its reputation and sink its profits.

Fashion stocks

Because the fashion industry is so vast, there are several companies you can invest in. Here is a list of fashion stocks that may interest you:

  • Lululemon Athletica Inc. (TSX: LLL)
  • Reitmans (Canada) Limited (TSXV: RET-A)
  • Canada Goose Holdings Inc (TSX: GOOS)
  • Nordstrom, Inc. (TSX: JWN)
  • LVMH Moët Hennessy – Louis Vuitton, Société Européenne (OTC Markets, Pink Sheets: LVMUY)
  • Compagnie Financière Richemont SA (OTC Markets, Pink Sheets: CFRUY)
  • Aritzia Inc. (TSX: ATZ)
  • The Gap, Inc. (NYSE: GPS)
  • NIKE, Inc. (NYSE: NKE)
  • Under Armour, Inc. (NYSE: UA)

ETFs that track the fashion industry

Individual fashion stocks aren’t your only options. You can also buy shares of exchange-traded funds (ETFs) that invest in various fashion companies. ETFs are diversified and professionally managed portfolios of various securities like stocks and bonds. Here are some examples of ETFs that track both luxury and non-luxury fashion companies as well as other consumer discretionary stocks.

  • Amplify Online Retail ETF (NYSEARCA: IBUY)
  • SPDR S&P Retail ETF (NYSEARCA: XRT)
  • Direxion Daily Retail Bull 3X Shares (NYSEARCA: RETL)
  • Emles Luxury Goods ETF (BATS: LUXE)
A beginner’s guide to exchange traded funds (ETFs)

Compare trading platforms

Regardless of which fashion stock you might invest in, you need a brokerage account. You can easily open one online, but make sure to compare your options.

1 - 6 of 6
Name Product Finder Rating Available Asset Types Stock Trading Fee Account Fee Signup Offer Table description
Interactive Brokers
Finder Score:
★★★★★
4.2 / 5
Stocks, Bonds, Options, Index Funds, ETFs, Currencies, Futures
min $1.00, max 0.5%
$0
N/A
Winner for Best Overall Broker in the Finder Stock Trading Platform Awards.
Moomoo Financial Canada
Finder Score:
★★★★★
3.9 / 5
Stocks, Options, ETFs
$0.014/stock
$0
Get up to $1,200 or a $1,200 Apple gift card
Trade US stocks for up to 90% less and access free real time stock quotes and level 2 market data. T&C's Apply.
CIBC Investor's Edge
Finder Score:
★★★★★
3.7 / 5
Stocks, Bonds, Options, Mutual Funds, ETFs
$6.95
$0 if conditions met, or $100
100 free trades + up to $4,500 cash back
An easy-to-use platform with access to a variety of tools to help you trade with confidence.
RBC Direct Investing
Finder Score:
★★★★★
3.8 / 5
Stocks, Bonds, Options, Mutual Funds, ETFs, GICs
$6.95 - $9.95
$0 if conditions met, otherwise $25/quarter
N/A
Enjoy no minimum trading activity requirements and pay just $9.95 per trade or $6.95 if making 150 trades per quarter.
Questrade
Finder Score:
★★★★★
3.9 / 5
Stocks, Bonds, Options, Mutual Funds, ETFs, GICs, International Equities, Precious Metals
$4.95 - $9.95
$0
Get $50 in free trades when you fund your account with a minimum of $1,000.
Opt for self-directed investing and save on fees or get a pre-built portfolio to take out some of the guesswork.
Qtrade Direct Investing
Finder Score:
★★★★★
3.6 / 5
Stocks, Bonds, Options, Mutual Funds, ETFs, GICs
$6.95 - $8.75
$0 if conditions met, otherwise $25/quarter
Get up to a $150 sign-up bonus. Use code OFFER2024. Ends October 31, 2024.
Low trading commissions and an easy-to-use platform with access to powerful tools and a wide selection of investment options.
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Bottom line

Fashion stocks can be lucrative investments. But watch out for risks like volatility, consumer criticism, external markets and more. Before you start investing, compare stock trading platforms to see which one fits.

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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