CNBC’s Jim Cramer highlighted six fashion and apparel stocks on Monday for investors looking for alternatives to the struggling AI trade.
While tech stocks have come under pressure in recent weeks, consumer stocks have been resilient. At SPDR S&P Retail ETF (XRT) gained 10% this quarter, while the Technology Select Sector SPDR Fund ( XLK ) is down 11%. Cramer said falling interest rates could provide an additional boost to apparel companies heading into the holiday shopping season.
“Ralph Lauren, Tapestry, Levi’s, VF Corp, Kontoor Brands and Reformasi are some of the fashion stocks we think are the best today,” the “Mad Money” host said.
Ralph Lauren remains Cramer’s favorite apparel stock, thanks to consistent growth in CEO Patrice Louvet. The company continues to gain momentum in apparel, accessories and women’s clothing, and has strengthened its international presence, particularly in Asia. Although stocks were pulled back in August and September, they have started to recover, and Cramer is optimistic ahead of the earnings report on Monday morning.
Tapestrythe parents of Coach and Kate Spade, also reported Thursday. Cramer likes Coach’s position in the accessible luxury market, especially its popularity among younger female consumers. However, shares have fallen 20% since the company’s August earnings report, when guidance failed to impress investors after a massive multiyear rally. “I hope the report on Thursday can represent the beginning of Tapestry’s answer,” he said.
Levi Strauss another potential turnaround story. Shares fell below $20 after a disappointing few weeks ago, but CEO Michelle Gass told Cramer that the company is quickly addressing inventory shortages in popular fashion. The stock has since returned more than 20% of its modest earnings, though Cramer still considers it cheap at about 14 times, with a dividend yield of 2.8%. “I think it’s a good choice to play the big strength in denim that we keep hearing about,” he said.
VF Corpwhich owns The North Face, Vans and Timberland, shows signs of improvement after years of struggle, especially in Vans. Cramer pointed to encouraging results from Piper Sandler’s recent teen survey and strong quarterly reports as evidence that the sneaker brand’s shift could gain traction. The stock has risen about 14% since he recommended the stock about two weeks ago.
Kontoor brand offers other opportunities tied to denim and corporate restructuring. The company plans to sell the Lee brand for up to $1 billion, so it can focus on Wrangler and outdoor clothing maker Helly Hansen. Cramer expects the selloff to be followed by substantial share repurchases and says the remaining businesses have room to grow. Shares trade at approximately 14 times earnings and offer a dividend yield of close to 3%.
Cramer’s more speculative pick is Reformation. The women’s fashion brand initially struggled after its IPO in late July, but Cramer said it “has grown tremendously, is profitable, and has a different shopping experience than the tech kicker.” Cramer highlighted the stock in late September; the stock surged more than 31% in October.