Western style clothing, particularly denim, is experiencing a resurgence in popularity that is expected to drive stock market growth over the next several years. According to TD Cowen analyst Oliver Chen, the recent momentum in the denim category is sustainable and is likely to continue until at least the end of 2024. This resurgence is fueled by a variety of factors, including trends around head-to-toe denim dressing and artisanal garments that are driving higher spending in the category. The Western fashion cycle, of which denim is a key component, has gained popularity through its association with music icons and high-profile fashion lines.
Among the companies that stand to benefit from the denim revival are Boot Barn, Levi Strauss, and Ralph Lauren. These companies have been identified as key plays on the trend by analyst Oliver Chen. Ralph Lauren, in particular, has seen a boost in average unit revenue through brand elevation efforts, while Levi Strauss has been successful in their direct-to-consumer premiumization strategies. Both companies have outperformed the market in 2024, with Levi Strauss surging about 36% and Ralph Lauren adding around 16%.
While there is optimism surrounding these denim stocks, Wall Street analysts have varying opinions on their future performance. The average analyst has a buy rating on Ralph Lauren with a price target that suggests upside potential of approximately 15%. On the other hand, there are concerns that Levi Strauss may experience a slight pullback, with the majority of analysts rating the stock as a hold. Boot Barn, another player in the Western wear market, has also seen growth in their same-store sales, indicating increased interest in Western fashion. However, the specific catalyst for this growth is not clearly defined.
Despite the positive outlook for denim stocks, there are risks that investors should be aware of. One key risk highlighted by Chen is whether customers will continue to spend on the Western fashion trend despite potential price increases. This uncertainty could impact the future performance of companies operating in this space. Additionally, while celebrity endorsements like Beyoncé’s “Cowboy Carter” album have helped generate interest in Western fashion, it remains to be seen whether these endorsements will translate into sustained growth for denim stocks.
Looking ahead, the denim category is poised for continued growth as Western fashion remains popular among consumers. The success of companies like Levi Strauss, Ralph Lauren, and Boot Barn demonstrates the potential for strong performance in this sector. As trends evolve and consumer preferences shift, companies will need to adapt their strategies to capitalize on the ongoing resurgence of Western fashion. By staying attuned to market dynamics and consumer sentiment, denim stocks can continue to thrive in the years to come.