The top fashion and clothing stocks to watch in 2026

The fashion sector in 2026: key themes

The global fashion and apparel market has been shaped by four dominant forces through 2025 and into 2026: a prolonged slowdown in Chinese luxury spending, the impact of US tariffs on supply chains and consumer prices, the continued shift to online and omnichannel retail, and AI-driven personalisation and inventory management. Luxury brands have diverged significantly in performance, with resilient top-end names like Hermès outperforming mass-market luxury, while fast fashion giants like Inditex have maintained their competitive edge through supply chain agility.

The global luxury fashion market is expected to grow from $257.45 billion in 2025 to $337.18 billion by 2033, a CAGR of 3.43%. The accessible luxury and fast fashion segments are growing faster in unit terms, though at lower margins.

Fashion stocks to watch

Inditex

Inditex, the world's largest fashion retailer by revenue and owner of Zara, posted record full-year 2025 results: net sales of €39.9 billion, up 3.2% reported and 7.0% at constant currency, with net income up 6% to €6.2 billion and gross margin improving to 58.3%. Online sales grew 4.8% to €10.7 billion, now representing over a quarter of total group revenues. Early FY2026 data (first five weeks) showed constant-currency sales up 9%, suggesting strong momentum continuing into the new year. The board proposed a full-year dividend of €1.75 per share for FY2025.

Burberry Group

Burberry delivered what CEO Joshua Schulman called 'a meaningful inflection point' with its FY2026 results on 14 May 2026: comparable store sales rose 2%, reversing a 12% decline the prior year; adjusted operating profit jumped to £160 million from £26 million; and reported operating profit reached £115 million against a £3 million loss. Full-year revenue was £2.42 billion, flat at constant exchange rates, with Q4 comparable sales accelerating to 5% growth. China and the Americas each delivered 10% comparable growth in Q4. The stock fell more than 5% on results day as investors reacted to the absence of detailed FY2027 financial targets.

LVMH

LVMH, the world's largest luxury group, reported full-year 2025 revenues of €80.8 billion, down 5% year-on-year but marginally ahead of consensus of €80.6 billion. Organic growth declined 1% on a constant-currency basis, better than the -1.8% analysts had expected. Fashion and leather goods, which contributes 75% of total operating profit, remains the soft spot. Chairman Bernard Arnault acknowledged that '2026 will not be easy', flagging currency headwinds, trade tensions and a still-cautious Chinese consumer market. The company is said to be in discussions around a potential stake in the Armani group following the death of founder Giorgio Armani in September 2025.

Hermès

Hermès has been the standout performer in luxury fashion during the sector's down cycle. The company delivered constant-currency revenue growth of 9% in 2025 with a 41% operating margin, outperforming all major luxury peers. Its strategy of artificial scarcity, limited production, consistent craftsmanship and avoidance of heavy discounting has insulated it from the demand volatility that has hit LVMH and Kering. At a current market cap of approximately €174 billion, Hermès trades at a significant premium to peers on most valuation metrics, which limits the upside case for new investors.

Kering

Kering, owner of Gucci, Saint Laurent and Bottega Veneta, has been the worst-performing major luxury group. Gucci's brand repositioning under new creative direction has been slow to translate into sales recovery, and Kering's heavy dependence on the brand (approximately 50% of group profits) has concentrated risk. The stock has fallen sharply from its highs and trades at one of its widest discounts to LVMH on a price-to-earnings basis in years, attracting contrarian interest from value-oriented investors.

Nike

Nike, the world's largest sportswear company, has been navigating its own reset, with a strategic refocus on wholesale partnerships after a period of prioritising direct-to-consumer channels. New CEO Elliott Hill, who returned to the company in late 2024, has been rebuilding relationships with wholesale retailers while rationalising the product portfolio. Nike remains the dominant global sportswear brand by awareness and market share, but its revenue trajectory has been under pressure and consensus expects the recovery to take multiple quarters.

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Risks for fashion stock investors

• China demand: Chinese consumers remain largely cautious in 2026. A sustained recovery would be a significant positive catalyst; a further deterioration would pressure LVMH and Kering most heavily.
• US tariffs: most luxury goods are produced in Europe and face US tariffs. Brands can offset through pricing power, but lower-end luxury and accessible brands have less flexibility.
• Currency headwinds: a weaker dollar reduces the euro value of US revenues when translated into reporting currencies. This has been a consistent drag on European luxury group headline numbers.
• Brand repositioning risk: Burberry, Gucci and others are mid-turnaround. Execution risk is high and the timeline for recovery is uncertain.
• Valuation: the sector has de-rated from its 2021-23 peak, but luxury P/E ratios remain elevated relative to the broader market. A further earnings disappointment could trigger another re-rating.

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