As artificial intelligence shares face a sharp selloff, Jim Cramer has turned attention to six fashion stocks he believes could benefit from a rotation into consumer businesses. Speaking on Mad Money Monday, Cramer highlighted Ralph Lauren, Tapestry, Levi Strauss, VF Corporation, Kontoor Brands, and Reformation as potential winners in the current market environment.
The SPDR S&P Retail ETF has gained roughly 10% this quarter, while the Technology Select Sector SPDR Fund has declined about 11%. Cramer argues that lower interest rates could support retailers heading into the holiday season, but his selections range from established brands to speculative turnarounds, each carrying distinct earnings risks.
Ralph Lauren: Premium Strategy Drives Momentum
Ralph Lauren remains Cramer's preferred apparel stock, citing CEO Patrice Louvet's premium-brand strategy and expansion across Asia. Shares have climbed roughly 380% from late-2022 lows. The latest quarter delivered 14% revenue growth and adjusted earnings of $4.59 per share, helped by stronger direct sales and demand for higher-priced products. Cramer also highlighted growth in women's clothing and accessories. Thursday's fiscal second-quarter results will test whether those gains can continue. After such a large rally, even strong earnings could disappoint if expectations are higher.
Tapestry: Can Coach Revive Confidence?
Coach-owner Tapestry appeals to Cramer because its handbags remain popular with younger shoppers seeking accessible luxury. Shares have fallen more than 20% since August earnings, when guidance failed to impress after a powerful rally. Cramer told CNBC he hoped Thursday's results would mark "the start of a comeback." Wells Fargo analyst Ike Boruchow maintained an Overweight rating on October 29 but reduced his target to $150 from $160. The challenge is translating Coach's popularity into stronger forecasts without relying on another valuation-driven rebound.
Levi Strauss: A Cheaper Way to Bet on Denim
Cramer sees Levi Strauss as a relatively inexpensive way to invest in renewed denim demand, pointing to a valuation around 14 times earnings and a dividend yield near 2.8%. Third-quarter sales increased 4% to $1.6 billion. Management raised its full-year adjusted earnings forecast to $1.54-$1.56 per share, while shares recovered more than 20% from their post-results low. Yet direct-to-consumer sales lagged internal expectations. CEO Michelle Gass says it moved to fix shortages of popular styles. Investors must see whether those improvements persist.
VF Corporation: Is Vans Finally Turning Around?
VF Corporation offers a more difficult recovery story. Its Vans brand continues to struggle, but early improvements have encouraged Cramer after better quarterly results. Adjusted operating profit, excluding Dickies, reached $364 million, beating guidance of around $315 million. Gross margin improved to 55.4%, although Vans revenue still dropped about 10%. Vans' direct-to-consumer business returned to growth, but one improved quarter is not a turnaround. Telsey Advisory raised its target to $18 from $17 while retaining Market Perform. Sustained wholesale recovery remains essential.
Kontoor Brands: Could Selling Lee Unlock Value?
Kontoor Brands is reshaping its portfolio around Wrangler and outdoor clothing label Helly Hansen. Cramer anticipates more buybacks. Kontoor agreed to sell Lee to Authentic Brands Group for up to $1 billion, comprising $750 million initially and a possible $250 million earnout. The transaction remains subject to closing conditions. Cramer pointed to a valuation around 14 times earnings and a dividend yield near 3%. The investment case rests on converting sale proceeds into better growth and shareholder returns, not simply completing the disposal.
Reformation: Cramer's Riskiest Pick
Reformation is Cramer's riskiest pick following its July listing and a share-price jump exceeding 31% in October. The women's fashion retailer increased second-quarter revenue 24.1% to $155.2 million, while net income rose 79.4% to $12.4 million. Cramer praised its "great growth" and profitability on CNBC, alongside its distinctive shopping experience. Its third-quarter results, due Thursday after the close, will test that enthusiasm.
This article is for informational purposes only and does not constitute financial advice.
