2024 Apparel Industry Pulse Study: What Advisors Need to Know

The past few years have been challenging for apparel companies. While stimulus spending and a sharp economic recovery brought strong results in 2021, a series of challenges have since led to inconsistent results and compressed valuations. Still, the industry is expected to experience a turnaround in 2025—signaling the emergence of long-term opportunities.

When financial advisors have a better understanding of the industry, it can be easier to identify the right apparel stocks for clients’ investing strategies. Our latest research takes a closer look at the latest Q1 2024 insights on market trends, industry drivers, supply and demand, and more.

To read the full research report, download a copy.

Many apparel retailers posted exceptional 2021 same-store sales growth numbers, but began to feel the effects of inflation, supply problems, and inconsistent demand by mid-2022. There was significant discounting to move excess inventory in first-half 2023, but comparable sales remained disappointing throughout the year.

But comparisons are easier in 2024 and some issues—such as elevated inventory—have begun to lessen. Still, same-store sales growth is likely to be in the low single digits in the long run. However, recent outliers are those catering to wealthier consumers, such as Lululemon and Free People.

The covid-19 outbreak in early 2020 caused a sudden and total collapse in international travel. The recovery has been quite slow as intermittent restrictions, economic conditions, and other factors have hit normal business and leisure travel patterns. Several domestic apparel firms that partially rely on tourist shoppers have been affected, including Macy's, Nordstrom, and Ralph Lauren.

Overall, the pace of a recovery in international travel will be hit by economic conditions in the US and abroad—as well as consumers’ appetite for travel. It’s also possible that travel to the US from China may continue to be soft due to hostilities between the two countries and the rise of shopping opportunities within China.

Although the share prices of most apparel companies under our coverage have rallied over the past year, about half of them are presently trading at 4- or 5 stars. This high percentage has changed little over the past year—and reflects investors’ concerns about the industry returning to typical patterns of excessive merchandise and discounting.

However, the percentage of very undervalued stocks has consistently been above 45%. In our view, investors have punished these stocks too severely due to weakening results since 2021. Strong performers over the past year (with share prices at least 30% higher) include Urban Outfitters and Inditex. Some of these were trading at very large discounts to our fair value estimates a year ago and have since rallied due to improving results or enthusiasm about a new strategy.

Investment strategies look different for every client. By knowing trends in major industries like apparel, you can initiate more meaningful conversations and guide your clients to make decisions that align with their goals.

Work smarter with Pitchbook. Our award-winning software gives you access to the data and tools you need to get answers fast and discover meaningful insights into different markets.

Request a free trial today.