Investing in Apparel Stocks

In 2024, the overall apparel market delivered global revenue of $1.8 trillion, a roughly 3.5% increase from the previous year, with the U.S. accounting for 20% of the total market share. While the broader market showed growth, some segments like fast fashion and luxury faced challenges, even as consignment and thrift apparel saw increased spending.

Trends such as e-commerce and athletic-inspired attire are reshaping the status quo. While apparel stocks are certainly subject to cyclicality, these businesses do benefit from long-term trends in consumer spending.

Apparel companies with robust omnichannel businesses and/or a unique value proposition to provide to consumers are most likely to succeed through and beyond economic slowdowns.

Clothing is a basic staple, so this isn’t an industry benefiting from prevailing secular trends. The best apparel companies are much more than just clothing manufacturers.

Nike needs little introduction. The global footwear and apparel leader has been a major part of sports and pop culture for decades and remains a household name in fashion, athletic gear, and everyday street clothing. While Nike's growth has been resilient through the decades, the last few years have brought challenges for the business.

Nike is facing struggles due to a combination of factors, including a slowdown in consumer demand, increased competition from other brands, and a shift in consumer preferences away from expensive sneakers and textiles toward experiences and basics. Some analysts also believe Nike has become too reliant on selling classic, retro designs like Dunks, Air Jordan 1s, and Air Force 1s while neglecting innovation and new product development.

The company's rapid shift toward a direct-to-consumer strategy, while initially promising, led to challenges in managing inventory and eroded long-standing relationships with key wholesaling partners. Nike's business in China, a key market, has faced headwinds due to economic slowdown and increased competition from local brands.

CEO Elliott Hill's multiyear turnaround plan for Nike centers on returning to the core of the brand's identity: sport and the athlete, with a focus on rebuilding relationships with retailers and driving innovation. While the recovery will be a multiyear effort, investors who believe in the future of this classic sportswear retailer may decide that the company's long-term growth story is a proposition worth waiting on.

Lululemon Athletica began as a pioneer of sorts with women’s yoga attire and significantly helped to popularize athletic-inspired apparel for everyday wear. Building on its early success, the company now has full lines of clothing for women, men, and children.

Lululemon continues to innovate its product offerings, expanding beyond yoga into categories like running and training and offering footwear. The company is aggressively expanding internationally, particularly in China and Europe, and is also targeting significant growth in men's and digital channels.

Lululemon could be an intriguing way for investors to capitalize on the athleisure boom worldwide, as well as the growth of the fitness industry.

Stitch Fix has made a name for itself in the online personal styling space. Founded in 2011, this company has quickly grown to be a leader in online retail. It uses machine learning on information collected from customers to help stylists curate personalized clothing and accessory options. Customers keep what they like and send back what they don’t want, giving Stitch Fix’s AI software algorithms more data to make the service even better.

The company has branched out and offers its customers the ability to shop and buy from its clothing collections directly, rather than just receive curated items. The service, called Stitch Fix Freestyle, could expand on the company’s appeal to consumers.

Over the last few years, Stitch Fix has faced a tough environment. Declining revenue, a slowdown in its active client base, and changes in consumer spending have led to a focus on cost-cutting. The company is aiming for a turnaround by 2026, but right now it is unprofitable and working to get back to consistently positive cash flows.

Stitch Fix is focusing on improving the customer experience and exploring new avenues for growth. This small apparel and retail technology company could have plenty of opportunities to grow if it can execute its turnaround strategy effectively.

In the rapidly evolving digital era, The TJX Companies -- parent company of T.J. Maxx, Marshalls, and HomeGoods -- would seem to be an unlikely winner. The retailer is highly reliant on sales from brick-and-mortar stores, which afford a treasure hunt-style shopping experience, and it has unpredictable inventory because it sources excess goods from manufacturers and retailers.

TJX operates under a unique off-price retail model, focusing on selling brand-name and designer merchandise at deep discounts. It sources its merchandise from various channels, including department store cancellations, manufacturer overstocks, and end-of-season closeouts, and that constantly rotating inventory keeps customers engaged.

Meanwhile, TJX cultivates strong relationships with vendors, often purchasing incomplete assortments of stock and not requiring return privileges, allowing them to acquire merchandise at attractive prices. This enables a streamlined supply chain that ensures stores are well-stocked with in-demand merchandise. TJX stock is another long-term value play among apparel stocks, and it pays a decent dividend to boot.

Yes, big-box store Target is an apparel company. In fact, it’s a fast-growing clothier. Consumers regularly rely on the retail chain for everyday items, including clothes. The last few years have brought some challenges for Target, including headwinds from decreases in discretionary consumer spending and inventory shrinkage due to increases in retail theft.

Target stores are widely accessible, with most of the U.S. population living within a few miles of one. Shoppers can find everything they need in just a single trip (or click), and the company's shipping and delivery operations are a further differentiator.

When the trajectory of consumer spending recovers, Target could be well-positioned to benefit. Despite its struggles the last few years, Target has maintained its commitment to its dividend throughout that time, and had clocked 54 years of consecutive dividend increases in 2025, making it part of an elite group of companies known as Dividend Kings.

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