A rising number of high-income population groups and increasing demand for high-end fashion products from the affluent population would support the fashion and luxury goods market growth.

Amid such conducive trends, investors could consider looking into fundamentally sound luxury stocks, The Estée Lauder Companies Inc. (EL), Ralph Lauren Corporation (RL), and Tapestry, Inc. (TPR).

Several key factors, including the growing number of wealthy consumers with higher incomes, an increasing desire for exclusivity and uniqueness, the strong impact of branding and brand value, the expanding influence of social media and digital platforms, and the acceleration of globalization, are driving the luxury fashion market.

Moreover, IMARC Group expects the market to grow at a CAGR of 3.1% between 2024 and 2032. By 2025, millennials and Gen Z combined are expected to represent 70% of global luxury goods sales, thus propelling the luxury retail industry. These younger shoppers are beginning to create or bring back their trends. 

Against the current market backdrop, consumers are cautiously optimistic. The Conference Board’s Consumer Confidence Index rose to 103.3 in August but remained within the narrow range that has prevailed for quite some time.

Considering these factors, let’s take a look at the fundamentals of the top three Fashion & Luxury stocks, beginning with the third choice.

Stock #3: The Estée Lauder Companies Inc. (EL)

EL manufactures, markets, and sells skin care, makeup, fragrance, and hair care products worldwide. It offers skin care products and makeup products, and other makeup tools. 

EL’s trailing-12-month gross profit margin of 71.66% is 100.5% higher than the industry average of 35.74%. Its trailing-12-month EBITDA margin of 15.03% is 12.4% higher than the 13.37% industry average. Also, the stock’s levered FCF margin of 9.48% compares to the 5.57% industry average.

For the fiscal fourth quarter that ended June 30, 2024, EL’s net sales increased 7% year-over-year to $3.87 billion. Its gross profit rose 14% from the year-ago value to $2.78 billion. In addition, the company’s non-GAAP operating income and non-GAAP EPS were reported at $349 million and $0.64, respectively.

Analysts expect EL’s revenue for the second quarter ending December 2024 to increase marginally year-over-year to $4.30 billion. Its EPS is expected to increase 21.9% year-over-year to $1.07 for the same quarter. The company surpassed Street EPS estimates in each of the trailing four quarters, which is impressive.

The stock has plunged 10.7% over the past month, closing the last trading session at $89.91.

EL’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

EL has an A grade for Growth and a B for Quality. The stock is ranked #19 out of 58 stocks in the B-rated Fashion & Luxury industry.

In addition to the POWR Ratings highlighted above, one can access EL’s ratings for Value, Momentum, Stability, and Sentiment here.

Stock #2: Ralph Lauren Corporation (RL)

RL designs, markets, and distributes lifestyle products in North America, Europe, Asia, and internationally. The company offers apparel, including a range of men’s, women’s, and children’s clothing, footwear, and accessories, as well as leather goods.

RL’s trailing-12-month gross profit margin of 67.14% is 81.1% higher than the industry average of 37.08%. Its trailing-12-month EBITDA margin of 15.60% is 36.8% higher than the 11.40% industry average. Also, the stock’s net income margin of 10.27% compares to the 4.54% industry average.

For the fiscal first quarter that ended June 29, 2024, RL’s revenues increased marginally year-over-year to $1.51 billion. Its gross profit rose 3.9% from the year-ago value to $1.07 billion.  

In addition, the company’s non-GAAP net income and non-GAAP net income per common share grew 10.5% and 15.4% from the prior year’s period to $174.60 million and $2.70, respectively.

Analysts expect RL’s revenue for the second quarter ending September 2024 to increase 2.4% year-over-year to $1.67 billion. Its EPS is expected to increase 12.3% year-over-year to $2.36 for the same quarter. The company surpassed Street revenue and EPS estimates in each of the trailing four quarters, which is impressive.

Over the past year, the stock has gained 47.3% to close the last trading session at $170.67.

RL’s POWR Ratings reflect bright prospects. The stock has an A grade for Quality. It is ranked #17 in the same industry.

To see the other RL ratings for Sentiment, Value, Growth, Momentum, and Stability, click here.

Stock #1: Tapestry, Inc. (TPR)

TPR provides luxury accessories and branded lifestyle products in North America, Greater China, the rest of Asia, and internationally. The company operates in three segments: Coach; Kate Spade; and Stuart Weitzman.

In terms of the trailing-12-month gross profit margin, TPR’s 73.29% is 97.7% higher than the 37.08% industry average. Its 13.89% trailing-12-month levered FCF margin is 154.9% higher than the 5.45 % industry average. Likewise, the stock’s 18.83% trailing-12-month EBIT margin is 140% higher than the 7.86% industry average.

During the fourth quarter that ended June 29, 2024, TPR’s net was reported at $1.60 billion. Its gross profit grew marginally year-over-year to $1.19 billion. Moreover, its net income was reported at $159.30 million and $0.68 per share.

Street expects TPR’s EPS for the first quarter ended September 2024, to increase 2.1% year-over-year to $0.95. The company’s revenue is expected to be $1.47 billion for the same quarter. The company surpassed consensus EPS estimates in each of the trailing four quarters.

TPR’s stock gained 21.8% over the past year to close the last trading session at $40.52.

TPR’s fundamentals are reflected in its POWR Ratings. The stock has a B grade for Sentiment and Quality. TPR is ranked #11 out of 58 stocks in the same industry.

Beyond what is stated above, we’ve also rated TPR for Growth, Stability, Value, and Momentum. Get all TPR ratings here. 

What To Do Next?

43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.

2024 Stock Market Outlook >

EL shares were trading at $90.61 per share on Friday afternoon, up $0.70 (+0.78%). Year-to-date, EL has declined -37.43%, versus a 18.56% rise in the benchmark S&P 500 index during the same period.

About the Author: Nidhi Agarwal

Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities. More...

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