Fashion Stocks

Are Fashion Retail Shares in Vogue? A Snapshot of the Leading Brands Right Now

Stocks can be stylish. Even though people often associate the financial world with black suits, statistics, and little in the way of style, trading does have its fashionable side. Specifically, fashion stocks. From high-end brands such as Christian Dior and Ralph Lauren to high-street labels like Gap and Zara, you can trade on retail shares in a variety of styles at CMC Markets.

Those of you familiar with the world of fashion stocks may be surprised to know that high fashion doesn't always mean high prices. Take, for example, Ralph Lauren. Founded in 1967, the American brand’s stock fluctuated between $100 and $130 between June 2021 and June 2022.

This discrepancy between a company’s status in the fashion industry and its performance on the stock market becomes even more pronounced when you look at its high-street counterparts. Then, when you add the sustainable fashion sector with its projected value of $8.25 billion by 2023, you get an interesting mix of opportunities.

Market Cap/Revenue

(M) - Market Cap, (R) Revenue

Sources: London Stock Exchange, NASDAQ, Yahoo Finance.

Fashion shares data: A snapshot of the leading brands

Retail stocks from either end of the fashion spectrum can be profitable if you enter and exit the market at the right times. To decide where best to focus your attention, high-end or high-street, it’s worth looking at some facts. With this in mind, here’s the data we collected [PK7] [CT8] for some of the leading retail stocks in the world. Before we run through the numbers, here’s how we carried out our analysis.

Methodology

The data in this report is taken from the London Stock Exchange, NASDAQ, and Yahoo Finance. Searches were carried out to find the top fashion brands by market cap, as well as the most popular markets and brands by Google search data.

Of all the high-end brands, only PVH Corp has seen its share price increase in 2022. Retail shares across the board have struggled, but what’s interesting to note is that high-end brands haven’t fared as badly as their counterparts. Where the likes of Nike, ASOS, and thredUP have all seen their share prices fall by 25% or more, retail shares for luxury brands have fallen by less than 20%.

The high-street brands continue to post impressive annual returns, but stock prices continue to slide. Our three highlighted brands have all seen their values decrease in the first half of 2022. However, they are innovating. Nike continues to sponsor sporting events, including the Women’s Euro 2022.

Adidas is also becoming more involved in women’s sports, while Zara is branching out into new areas such as clothing for cyclists. This innovation, coupled with an uptick in high-street footfall, saw Zara’s sales increase by 36% in Q2 2022.

Stock Price (YTD)

As part of the Collaborative Consumption movement, thredUP is a platform where consumers can buy and sell second-hand clothing. According to thredUP’s 2022 Resale Report, the second-used online “thrift market” is projected to be worth $82 billion by 2026. Given that thredUP is already a market leader, that could be a positive for those with stocks in the company.

Google Trends: What are consumers searching for?

Consumer Online Search Patterns

2012

2017

2022

Another interesting metric to consider is Google search data. From 2012 to 2022, consumer interests, at least with regards to online queries, have shifted. The table below shows the market share each search query has received over time in the UK:

*Data for 2022 taken from 1/02 to 9/06

As you can see, there has been a clear shift away from high-street fashion and towards "fast" as well as the opposite end of the spectrum with "sustainable" fashion. This suggests that consumers are more interested in online brands and, for some, those that have taken an environmentally friendly stance. However, fast fashion brands have the opposite stance to sustainable brands, suggesting that there is a divide between the wants of consumers.

The possible conclusion here is that, while retail shares in these online and sustainable fashion companies might be down in 2022, they could have long-term potential due to strong consumer interest. It's also possible to say that, while luxury fashion search queries have dropped, it's not a significant decline. This could mean luxury fashion will remain a consistent performer, even in bear markets.

Market assumptions: Should you trade on retail fashion shares?

Market Size per Brand Category

According to the data, retail shares are struggling in 2022. Still, if you trade stocks, you'll understand that bearish markets can present opportunities. Interestingly, high-end brands have taken the least hit.

High-street and online retailers have suffered more. However, given that brands such as Nike, Zara, and ASOS have large market caps, the current share prices could be attractive. Assuming they continue to innovate, they have the capital and resources to rebound from the current slump. If that happens, retail shares in these companies could increase in value.

Last but not least, companies within the sustainable fashion sector have suffered the most losses in 2022. It's important to note that this market is still in its infancy. All retail shares are struggling, so the smallest sector is often a sufferer. The demographics of the industry show that online retailers and high-end brands dominate with market values of $91.2 billion and $89.3 billion, respectively.

High-street has a worth of $60 billion, while sustainable fashion has a value of just $7.5 billion. So there is potential for growth, and the data supports this. In 2021, Lyst found page views for "vegan leather" increased by 178%. Additionally, Depop data shows that 75% of Gen Z buyers buy used clothes to reduce consumption. While sustainable fashion companies have been the biggest losers so far in 2022, they might be viable in the long run.

Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for.