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.
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 taste at any given time. Taste can be immensely unpredictable. A clothing trend, for example, may be “in” today and “out” tomorrow. And if the companies that promote this image don’t adapt, they could be in big trouble. So could their investors.
To add another layer of risk, the fashion space indirectly relies on other complex industries. Think about the market for gold, platinum and other precious metals needed to make luxury goods. You also must consider the markets involved in making fashion products. Foreign tensions could impact the exports of raw materials used to make items like clothing and footwear. This includes cotton, wool, silk and other fabrics. For instance, China in October 2020 demanded that its mills stop buying Australian cotton due to speculation that Australia was about to place a hefty tariff on Chinese cotton. This could affect the production of cotton-based products made in China and exported around the world.
Another factor that can contribute to volatility is consumer backlash. While the fashion industry has devout followers, it also has its share of people who aren’t their biggest fans. We’ve all seen “Fur is murder” somewhere. And you’ve probably seen a social media post about why your friend wants you to boycott a certain cosmetics brand over animal testing. If these sentiments were to grip the public consciousness on a massive scale, some fashion industry companies may suffer losses.
It’s important to keep a keen eye on the status of the fashion stocks you’re considering.
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.
Select a company to learn more about what they do and how their stock performs, including market capitalization, the price-to-earnings (P/E) ratio, price/earnings-to-growth (PEG) ratio and dividend yield. While this list includes a selection of the most well-known and popular stocks, it doesn't include every stock available.
Company summary
LVMH Moët Hennessy - Louis Vuitton, Société Européenne operates as a luxury products company. The company offers champagnes, wines, and spirits under the Ao Yun, Ardbeg, Belvedere, Bodega Numanthia, Cape Mentelle, Chandon, Château Cheval Blanc, Château d'Yquem, Cheval des Andes, Clos des Lambrays, Clos19, Cloudy Bay, Dom Pérignon, Glenmorangie, Hennessy, Krug, Mercier, Moët & Chandon, Newton, Vineyard, Ruinart, Terrazas de los Andes, Veuve Clicquot, Volcan de mi Tierra, and Woodinville brands. It also provides fashion and leather products under the Berluti, Celine, Christian Dior, Emilio Pucci, Fendi, Givenchy, Kenzo, Loewe, Loro Piana, Louis Vuitton, Marc Jacobs, Moynat, Nicholas Kirkwood, Pink Shirtmaker, and Rimowa brands. In addition, the company offers perfumes and cosmetics under the Acqua di Parma, Benefit Cosmetics, Fenty Beauty by Rihanna, Fresh, Parfums Givenchy, Guerlain, Kat Von D Beauty, Kenzo Parfums, Maison Francis Kurkdjian, Make Up For Ever, Marc Jacobs Beauty, Parfums Christian Dior, and Perfumes Loewe brands; watches and jewelry under the Bvlgari, Chaumet, Fred, Hublot, TAG Heuerand Zenith brands; and custom-designed yachts under the Feadship brand name, as well as designs and builds luxury yachts under the Royal Van Lent brand. Further, it provides daily newspapers under the Les Échos brand; Belmond, a luxury tourism service; home other activities under the Belmond, Cheval Blanc, Connaissance des Arts, Cova, Investir, Jardin d'Acclimatation, La Samaritaine, Le Parisien, and Radio Classique brands; and selective retailing products under the DFS, La Grande Epicerie de Paris, Le Bon Marché Rive Gauche, Sephora, and Starboard Cruise brands, as well as operates Jardin d'Acclimatation, a leisure and amusement park. As of December 31, 2019, the company operated 4,915 stores worldwide. The company was incorporated in 1923 and is headquartered in Paris, France.
Historical performance
Stock information
Market capitalization: $294457966592
P/E ratio: 56.2961
PEG ratio: 6.0549
Dividend yield: 0.0091%
Company summary
The Gap, Inc. operates as an apparel retail company worldwide. The company offers apparel, accessories, and personal care products for men, women, and children under the Old Navy, Gap, Banana Republic, Athleta, Intermix, Janie and Jack, and Hill City brands. Its products include denim, tees, fleece, khakis, and other products; and fitness and lifestyle products for use in yoga, training, sports, travel, and everyday activities to women and girls. The company offers its products through company-operated stores, franchise stores, Websites, third-party arrangements, and catalogs. It has franchise agreements with unaffiliated franchisees to operate Old Navy, Gap, and Banana Republic stores in Asia, Europe, Latin America, the Middle East, and Africa. As of February 1, 2020, the company had 3,345 company-operated stores; and 574 franchise stores, as well as online. The Gap, Inc. was founded in 1969 and is headquartered in San Francisco, California.
L Brands, Inc. operates as a specialty retailer of women's intimate and other apparel, personal care, and beauty and home fragrance products. The company operates in three segments: Victoria's Secret, Bath & Body Works, and Victoria's Secret and Bath & Body Works International. Its products include bras and panties, loungewear, athletic attire, shower gels and lotions, aromatherapy, soaps and sanitizers, and body care accessories. The company offers its products under the Victoria's Secret, PINK, Bath & Body Works, White Barn, C.O. Bigelow, and other brand names. It sells its merchandise through company-owned specialty retail stores; through its Websites; and through franchises, licenses, and wholesale partners. As of May 20, 2020, the company operated 2,897 company-owned specialty stores in the United States, Canada, the United Kingdom, and Greater China, as well as sold its brands through approximately 700 franchised locations and online worldwide. The company was formerly known as Limited Brands, Inc. and changed its name to L Brands, Inc. in March 2013. L Brands, Inc. was founded in 1963 and is headquartered in Columbus, Ohio.
American Eagle Outfitters, Inc. operates as a specialty retailer that provides clothing, accessories, and personal care products under the American Eagle and Aerie brands. The company provides jeans, and specialty apparel and accessories for men and women; and intimates, activewear, and swim collections, as well as personal care products for women. In addition, it offers sports apparel under the Tailgate brand; and menswear products under the Todd Snyder New York brand name. As of February 1, 2020, it operated approximately 940 American Eagle stores, 148 Aerie stand-alone stores, 5 Tailgate stores, and two Todd Snyder stores in the United States, Canada, Mexico, China, and Hong Kong. It also ships to 81 countries through its Websites; and offers its merchandise at 217 locations operated by licensees in 24 countries, as well as provides products through its Websites ae.com, aerie.com, and ToddSnyder.com. American Eagle Outfitters, Inc. was founded in 1977 and is headquartered in Pittsburgh, Pennsylvania.
Under Armour, Inc., together with its subsidiaries, develops, markets, and distributes branded performance apparel, footwear, and accessories for men, women, and youth primarily in North America, Europe, the Middle East, Africa, the Asia-Pacific, and Latin America. The company offers its apparel in compression, fitted, and loose types to be worn in hot and cold. It also provides various footwear products for running, basketball, cleated sports, training, and outdoor. In addition, the company offers accessories, which include gloves, bags, and headwear; and digital fitness subscriptions, as well as digital advertising through MapMyFitness, MyFitnessPal, and Endomondo platforms. It primarily offers its products under the HEATGEAR, COLDGEAR, RUSH or RECOVER, UA Logo, UNDER ARMOUR, UA, ARMOUR, PROTECT THIS HOUSE, I WILL, ARMOURBOX, ARMOUR BRA, and ARMOUR FLEECE, as well as MyFitnessPal, MapMyFitness, and UNDER ARMOUR CONNECTED FITNESS brands. The company sells its products through wholesale channels, including national and regional sporting goods chains, independent and specialty retailers, department store chains, institutional athletic departments, and leagues and teams, as well as independent distributors; and directly to consumers through a network of 388 brand and factory house stores, as well as through e-commerce websites. Under Armour, Inc. was founded in 1996 and is headquartered in Baltimore, Maryland.
Historical performance
Stock information
Market capitalization: $7256577536
P/E ratio: 41.15
PEG ratio: 3.5673
Dividend yield: 0%
Company summary
lululemon athletica inc., together with its subsidiaries, designs, distributes, and retails athletic apparel and accessories for women, men, and female youth. It operates through two segments, Company-Operated Stores and Direct to Consumer. The company offers pants, shorts, tops, and jackets for healthy lifestyle and athletic activities, such as yoga, running, and training, as well as other sweaty pursuits; and athletic wear for female youth. It also provides fitness-related accessories. The company sells its products through a chain of company-operated stores; outlets and warehouse sales; a network of wholesale accounts, such as yoga studios, health clubs, and fitness centers; temporary locations, including seasonal stores; and license and supply arrangements, as well as directly to consumer through mobile apps, and lululemon.com e-commerce site. As of February 2, 2020, it operated 491 company-operated stores under the lululemon and ivivva brands in the United States, Canada, the People's Republic of China, Australia, the United Kingdom, Japan, New Zealand, Germany, South Korea, Singapore, France, Malaysia, Sweden, Ireland, the Netherlands, Norway, and Switzerland. lululemon athletica inc. was founded in 1998 and is based in Vancouver, Canada.
Abercrombie & Fitch Co., through its subsidiaries, operates as a specialty retailer. The company operates in two segments, Hollister and Abercrombie. It offers an assortment of apparel, personal care products, intimates, and accessories for men, women, and children under the Hollister, Abercrombie & Fitch, abercrombie kids, Moose, Seagull, and Gilly Hicks brands. As of May 28, 2020, it operated approximately 850 stores in North America, Europe, Asia, and the Middle East. The company sells products through its stores and direct-to-consumer channels; various third-party wholesale, franchise, and licensing arrangements; and e-commerce platforms. Abercrombie & Fitch Co. was founded in 1892 and is headquartered in New Albany, Ohio.
Historical performance
Stock information
Market capitalization: $1415248000
P/E ratio: 17.35
PEG ratio: -24.52
Dividend yield: 0.069%
Fashion ETFs
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 fashion stock ETFs.
Amplify Online Retail ETF (IBUY)
SPDR S&P Retail ETF (XRT)
VanEck Vectors Retail ETF (RTH)
Direxion Daily Retail Bull 3X Shares (RETL)
Amundi ETF S&P Global Luxury (GLUX)
Amundi ETF S&P Global Luxury UCITS ETF (LUXU)
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.
Disclaimer: The value of any investment can go up or down depending on news, trends and market conditions. We are not investment advisers, so do your own due diligence to understand the risks before you invest.
Bottom line
Fashion stocks can be lucrative investments. But watch out for risks like volatility, changing consumer consciousness, external markets like precious metals and more. Before you start investing, compare stock trading platforms to see which one fits.
Javier Simon is a freelance investing writer at Finder. He is a certified educator in personal finance (CEPF) with a bachelor's degree in multimedia journalism from SUNY Plattsburgh. He's been featured on NerdWallet, Bankrate, SmartAsset and other major finance websites. He loves writing content that helps people understand complex financial concepts, so they can make better financial decisions. When he's not writing and researching investing concepts, he likes going to rock concerts and the movies.
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