Best fashion stocks

Fashion might not be the first thing that comes to mind when you think of the stock market. In fact, fashion is something you might associate more with runways, glossy magazine pages, and dazzling storefronts than with financial portfolios or trading floors.Yet, beneath the stylish exterior of this glamorous industry lies a world of robust investment opportunities that savvy investors can capitalise on.

With forecasts suggesting a surge in market revenues to $1.94 trillion (around £1.5 trillion) by 2027 and a wardrobe-busting $2 trillion by 2028, fashion stocks represent not just a slice of elegance but also a piece of a rapidly expanding economic pie. If you’re thinking of getting yourself a piece of this pie, here are some of the best fashion stocks to buy in 2024 and beyond.

What are the best fashion stocks?

These aren’t necessarily the best fashion stocks to buy today, but here are the top holdings in the S&P Global Luxury Index. This is the industry benchmark for luxury global goods, but it does contain some stocks that aren’t strictly just in the fashion sector.

Icon	Stock	1 year performance (January 2024)	5 year performance (January 2024)	Link to invest
	Lululemon Athletica (LULU)	53.41%	212.62%	Invest with XTBCapital at risk
	Tesla (TSLA)	43.90%	949.65%	Invest with XTBCapital at risk
	Marriott (MAR)	38.03%	116.54%	Invest with XTBCapital at risk
	Ferrari (RACE)	36.51%	201.37%	Invest with XTBCapital at risk
	Hermes (RMS)	11.03%	264.99%	Invest with XTBCapital at risk
	Mercedes-Benz (MBG)	-10.16%	37.83%	Invest with XTBCapital at risk
	Compagnie financiere Richemont (CFR)	-12.91%	73.52%	Invest with XTBCapital at risk
	LVMH-Moet Vuitton (MC)	-14.17%	160.44%	Invest with XTBCapital at risk
	Nike (NKE)	-20.55%	25.00%	Invest with XTBCapital at risk
	Kering (KER)	-32.38%	-14.21%	Invest with XTBCapital at risk

What are fashion stocks?

Fashion is an umbrella term that refers to a broad spectrum of products. This includes clothing, footwear, accessories, beauty products, and any other item you wear to enhance appearance, style or comfort. Fashion stocks are the shares of companies involved in the design, production, marketing and sale of such products.

Types of fashion stocks

The fashion industry is very diverse, and so are the choice of fashion stocks you can invest in. Here’s a rundown of the main categories.

• Luxury brands. These are the high rollers of the fashion world. Think opulence, exclusivity, and a price tag to match. This category includes renowned entities like LVMH, Gucci, and Burberry, which specialise in high-end, often designer clothing and accessories.
• High street brands. If luxury brands are the champagne of the fashion industry, high-street brands are the craft beer. These companies offer fashionable, trendy clothing without the gasp-inducing price tags of luxury brands. Notable examples are Zara, Forever 21 and H&M.
• Activewear and athleisure brands. Activewear brands produce clothing and apparel specifically designed for physical activity and sport. Athleisure brands, on the other hand, focus on fashion that blends athletic functionality with leisure and comfort. Some prominent names in this sector are Nike, Adidas and Lululemon.
• Accessory and footwear companies. This includes companies that specialise in fashion accessories, footwear and handbags. Noteworthy examples are Capri Holdings (owner of Michael Kors) and Skechers.
• Ecommerce and online fashion retailers. These are brands that predominantly sell fashion products online, catering to the growing demand for online shopping. A few popular names in this space are Asos, Farfetch, and Zalando.

How to invest in fashion stocks

1. Open a sharing-dealing account. The first step before investing in fashion stocks is to open a share trading account. Choose a platform that suits your needs, whether it’s one with robust research tools, low fees or a user-friendly interface.
2. Fund your account. Once your account is set up, deposit funds. You can do that via a bank transfer, debit card or any other means allowed by your platform.
3. Research and choose fashion stocks. Research the best fashion stocks for your portfolio, and then search for them by company name or ticker symbol.
4. Buy shares. Once you’ve found the fashion stock, select the amount you want to invest and create an order to buy shares. And just like that, you’re now officially an investor in the fashion industry.

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Why do people invest in fashion stocks?

Many investors are comfortable investing in fashion because it’s a part of everyday life. Think about it, we see fashion virtually everywhere – from the streets we walk to the screens we watch.

For fashion aficionados, investing in fashion stocks presents an opportunity to grow wealth in a field they’re passionate about, with brands they admire. Of course, you shouldn’t just invest in a brand just because you like it, that’s a recipe for disaster. Make sure to research it thoroughly first to ensure it aligns with your investment goals and strategy.

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Advantages of investing in fashion stocks

Here are a few of the main benefits when it comes to investing in fashion:

• Choice diversity. Just like a well-rounded wardrobe, the fashion industry offers a variety of choices for investors. From luxury brands to budget-friendly retailers to sustainable labels, there’s something for every investment taste or preference.
• Brand power. Some fashion companies are household names, enjoying widespread recognition and steadfast loyalty from customers. This brand strength translates into consistent sales or profit margins for these companies, who often have pricing power, which benefits you directly as a shareholder.
• Exposure to global markets. A lot of the top fashion brands operate globally, providing exposure to diverse markets. This global reach can also offer potential protection against regional economic downturns and other adverse market forces, potentially stabilising investments.
• Dividend income. Many fashion stocks pay dividends, which means you can earn some passive income by holding onto these stocks. But keep in mind, dividend payments are never guaranteed and depend on the performance of the business.

Risks of investing in fashion stocks

Unfortunately, it’s not all silky smooth sunshine and rainbows, even for the best fashion stocks. Here are the not-so-glamorous elements of the fashion industry that you should be wary of before investing:

• Trends dependency. Fashion is hugely reliant on trends and consumer tastes, which unfortunately can change in a heartbeat. Indeed, today’s hot trend could be tomorrow’s forgotten fad. Companies that have risen to the top on the back of a specific trend may struggle once that trend fades.
• Economic sensitivity. Fashion spending often takes a hit during economic downturns. When budgets tighten, following the latest trends might not be a top priority for many. Non-essential fashion segments are especially vulnerable as consumers cut back on discretionary spending.
• Sustainability pressures. As the world demands more sustainable and ethical practices, fashion brands face the challenge of meeting these demands without losing their ability to deliver value to their shareholders.

Expert comment - What’s the best fashion stock for 2024?

George Sweeney

Deputy editor

I think when it comes to investing in fashion, you always want to think about the wider economy. For example, global stimulus packages were great for luxury goods - people were treating themselves or pumping money into fancy stocks. And the wealthiest were becoming wealthier as the overall stock market grew.

Some fashion stocks have pricing power and can raise prices if costs rise due to inflation, which is why some of the lower-end, budget options have fared well in recent years. In 2024, if we see lower inflation and potentially lower interest rates (making it cheaper to borrow), I think it could be a good year for the non-essential fashion stocks. Maybe not luxury, but the firms that sit somewhere between basic and luxury.

Alternative ways to invest in fashion stocks

If investing directly in the individual stocks of fashion companies isn’t your style, consider these alternatives:

• Exchange-traded funds (ETFs). Investing in ETFs means owning a basket of fashion stocks, providing broader exposure while also spreading out risk.
• Investment trusts and funds. Some investment trusts and funds allocate a significant portion of their portfolio to fashion stocks. This is another way to gain exposure to the fashion industry without limiting yourself to one company or stock.
• Index funds. Broader index funds often include major fashion brands. It’s another low-risk way to have a stake in the fashion sector and benefit from it.
• Fashion startup investing. For the more adventurous investor, there’s also the option to invest directly in unlisted or emerging fashion projects and companies, such as through private equity deals or crowdfunding platforms.

Pros and cons

Bottom line

The fashion world is more than just glitz and glamour. It’s also an industry that offers unique investment opportunities for investors, and the potential to build wealth.

However, like any other investment, it carries inherent risks. A smart investment approach at the best and worst of times includes: diligent research, awareness of current trends, diverse holdings, and a long-term perspective – all essential if you want to succeed with fashion stocks.

Frequently asked questions

• Are fashion stocks a good investment?

  Fashion stocks can be a good investment, but it depends on the specific holdings and your strategy. Research your investments comprehensively, practice diversification, and adopt a long-term approach to increase your odds of success.

• What should I consider before investing in fashion stocks?

  Look at the brand's market position, financial health, response or adaptability to trends and level of consumer loyalty. Also, assess how the brand is addressing contemporary issues like sustainability, which is becoming increasingly important in the fashion world.

• Can I invest in fashion stocks if I'm not a fashion expert?

  Absolutely! While having a keen eye for, or an interest in fashion, can be an advantage, it’s not a prerequisite for successful investment in fashion stocks. Numerous tools and resources are available to help you do your diligence and make informed decisions, regardless of your level of expertise.

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