The denim category is experiencing a renaissance in Western styles, with TD Cowen analyst Oliver Chen predicting that this trend will continue through at least the end of 2024. Chen pointed to Boot Barn, Levi Strauss, and Ralph Lauren as key plays on this trend, highlighting the growth of the Western fashion cycle and the popularity of head-to-toe denim dressing and artisanal garments. The broader Western style, which denim is a centerpiece of, has gained popularity through its association with music icons and recent fashion lines. However, a key risk to the trend is whether customers will continue to spend on these styles despite potential price increases.
For clothing makers Levi Strauss and Ralph Lauren, Chen sees reasons to be bullish beyond just the Western resurgence. Ralph Lauren has seen increased average unit revenue through brand elevation efforts, while Levi Strauss’s direct-to-consumer premiumization strategies have paid off. Both stocks have outperformed the market in 2024, with Ralph Lauren up around 16% and Levi Strauss surging about 36%. However, analysts have differing opinions on the future performance of these stocks, with Ralph Lauren expected to have upside of approximately 15% while Levi Strauss may pull back slightly.
Boot Barn, which specializes in Western wear, is also benefiting from the increased interest in Western styles. CEO James Conroy acknowledged the brand’s strong performance and the cultural support for their products but noted that the impact of Beyoncé’s recent country album on customer behavior was minimal. While Boot Barn exceeded Wall Street’s expectations for earnings and revenue in its fiscal fourth quarter, the company’s guidance for future performance was more mixed. Despite this, Boot Barn shares have risen almost 40% compared to the start of 2024, with analysts generally having a buy rating on the stock but predicting flat performance over the next year.
Overall, the resurgence of denim in Western styles presents a promising opportunity for companies specializing in this category. With fashion trends such as head-to-toe denim dressing and artisanal garments driving consumer spending in this area, companies like Boot Barn, Levi Strauss, and Ralph Lauren are well-positioned to benefit. While there are risks associated with potential price increases and changing customer behavior, analysts remain optimistic about the future performance of these stocks. As the Western fashion cycle continues to gain popularity through music icons and fashion lines, these companies have the potential to capitalize on the trend and deliver strong financial results in the near to medium term.
