There are a great many individuals who only need basic clothing such as pants, T-shirts, jeans, and different staples of casual day to day wear. Individuals who live in rural areas or suburban territories concentrate more on carrying on with an ordinary way of life. This isn't to imply that there aren't style conscious people who have to update their wardrobe with the emerging trends. The point is, there is an extensive market for clothing and clothing companies make tones of profit each year. A lot of fashion and clothing retail companies ended well at Wall Street last year. Respectable clothing stocks are successful because they offer either a single type of clothing or consistent sets of different products.
What are clothing stocks?
Investing in a clothing or apparel company is a risk-based business because of the unpredictable nature of trends in the fashion industry. When you invest in clothing stocks, you are not just at the mercy of economy but on human tastes which are continually changing.
Investing in clothing Stocks
Keep the following things in mind before investing in a clothing stock:
- Make an educated investment
- Do not only invest in a brand because you like it
- Always read reviews and visit the outlets
- Study the gross margin trends
- Compare expected earnings growth rate of previous years
What qualifies as the best clothing stock?
The best clothing stocks always have one or more of the following attributes.
- Reliable Net Income
For any business, income is its life. A reliable income is what keeps the company running; it helps expand the footprint of the business and increases market share. Clothing stock should have a reliable total income. In any case, because of the constantly shifting interest and demand for a particular type of garment or clothes in general, it tends to be risky for a business to maintain consistency in stocks and market.
- Reliable Net Cash Inflow
Cash flow increases the working capital and enables a business to continue producing products. However, cash flow keeps fluctuating on a regular basis, and it also gets tough to estimate the expected demand, especially in the apparel industry. Therefore, if a company does not have a reliable and steady net cash inflow, then it will struggle with the finances, and it might need to abandon plans of expansion and growth if there isn't sufficient income.
- Reputable Brand Name
The last trademark that allows an organization to be a standout amongst the best acting clothing stocks value is having a renowned brand name. Shoppers purchase from brands which they can rely on and trust. Customer loyalty plays a vital role in the growth of a business. At the point when a customer has to choose between a popular brand and another store, they will pick the famous label because of its brand image. An old brand name additionally implies that it has been around for a long time, caters to the needs of customers and knows what they want. Huge brands are where they are by not just a good name but because they have a growing net income and positive cash flows.
Changing trends in market share of the apparel industry
Over the past, resellers have grown in business due to the high prices of legacy retailers. Resellers like eBay offer discounts and customers incentives such as cash on delivery which makes the shopping more convenient for consumers. Therefore, the resale sector will see a growth of 11% of the total market share until 2027 from a mere 6% back in 2017. Similarly, other web-based retail distributors such as Amazon and Stitch Fix will see a growth of 2-4% whereas, mid-range brands like Gap, H&M, etc, will fall to 14% in the coming years.
Before buying clothing stocks, it is essential to know the changing trends in the clothing industry as it gives you a good idea of where a particular business falls and how the customers will react to it in the future. A business is nothing without its consumers; if people stop buying clothes there’s no way brands or retailers can make a profit. Therefore, studying the changes in consumer behaviors and future estimation of market trends can help you make a smart investment decision.
Are clothing stocks a good investment?
Clothing stocks are a great investment in today’s world because of the increased growth rates of Profits in the clothing industry. When you are shopping for a new shirt or trouser, you do know that a portion of the cost reflects the profit of the retailers. That is because manufacturers and sellers promise to deliver a good quality product that is worth that value. Apply the same phenomena while buying the stocks of a clothing company. The higher the value of goods in exchange for superior craftsmanship and quality, the higher the profit. As Managing Director of Clothingric says “The stock market is packed with folks who know the value of everything, but the worth of nothing.”
Therefore, luxury brands cost more than regular retailers. Similarly, stocks of high-end brands and labels have more worth and value than the average retailers. As, David Schick, the Head Consumer and Retail Research Analyst at an investment banking and brokerage firm called Stifel said, “Luxury goods companies have a special edge when it comes to fending off the competitive threat from e-commerce.”
In short, many analysts believe that clothing stocks will remain robust in the coming years. Hence, it is high time to invest in a clothing stock. Based on previous estimations and records, the following are the top 3 clothing stocks for investment this year.
Best clothing stocks in 2019
- Nike
Nike is the best clothing stock for investment this year. Nike has only grown with time, and by the looks of its marketing strategies and customer’s response, it seems that it will continue to do so. It’s a great time to invest in Nike’s shares as it is not only capitalizing on active wear, but Nike intends to give a boost to the existing brand image. Nike has made a name for itself over the decades, and with stores all over the globe, it has become a global brand. It has turned into a renowned, high caliber worldwide brand name which is making huge profits each year.
Nike’s profits have only grown with time and have stable cash flows. However, being a top clothing label, the clothing stocks of Nike have had fluctuating earnings over the years. If we look at the numbers, we will see that in 2014 Nike earned $3.27 billion of profit whereas in 2016 the total net income reached $4.24 billion. However, in 2017 a profit of $3.6 billion was recorded again. According to recent reports, the total net income of Nike falls between $2.4- $3.9 billion, making it a strong contender in the stock market.
- Carter's Inc.
This century-old brand was established in 1865. Carter’s has a long history as it is the pioneer children’s wear brand. Carter's has aced the craft of being at the top of the list when it comes to talking about brands that have never run short of customers. Carter’s manufactures children’s clothing for the United States and Canada. As long as there are children, there will be Carter’s. It has survived more than a century in the apparel industry because of its high-quality products and low price tags. With more than 466 stores in the U.S. and 131 stores in OskKosh, it sells the products under the following company-owned chains:
- Carter's
- Child of Mine
- Precious Firsts
- Just One You
- Simple Joys
- Skip Hop
- OshKosh
Carter's is always growing; the net profit increased from $192 million in 2014 to $235 million the following year and reached $300 million in 2017. With robust and constant growth in profits, Carter’s is a great option to invest in when it comes to clothing stocks. Today, the total expected net income of Carter’s is from $300 - $400 million.
- Nordstrom
Nordstrom is another top clothing stock to invest in. Being a luxury brand, retailers like Nordstrom have a major benefit in comparison to other clothing stocks: well-off customers. This section of the population has more extra cash than consumers for other down-scale brands. In this way, they have all the higher prices.
Nordstrom delivers plenty of top-notch clothing items and accessories. Shopping from Nordstrom is an experience in itself which has earned it a reliable and loyal customer base. Although Nordstrom has had fluctuating profits, it remains a successful business. As stated earlier, shifting profits does not mean that a clothing stock is stuck in an unfortunate situation. The net income of Nordstrom has been falling in recent years; however, it remains a fruitful organization. It produced over $750 million worth of profit last year. The S&P 500 Index of Nordstrom increased to 350% in 2013.
Why investing in Amazon is a smart decision?
Amazon has seen tremendous growth since its inception. The apparel sales of Amazon in the US have increased over the years; with a period of one year the apparel sales of Amazon grew up to 25% from 2015-2016 generating a profit of $3.4 billion. Whereas the total online and in-store apparel sales growth rate in the US was only 3% in 2016.
These numbers give a perfect idea of how the clothing sector of Amazon is growing. With continuous sales in the apparel market, Amazon is a smart option for investment.
Conclusion
Whether Amazon, Nike or Michael Kors investing in clothing stocks will prove to be a fruitful decision as the apparel industry is constantly on the rise. Having said that, the ever-changing market share, fluctuating fashion trends and evolving tastes of the consumers are the risk factors which should be kept in kind before making any investment in clothing stocks. Remember, investment is not about luck; it is a game of making a smart and sound decision.
