In a recent report, TD Cowen analyst Oliver Chen predicted a renaissance in Western styles that could boost stocks specializing in denim. He identified Boot Barn, Levi Strauss, and Ralph Lauren as key plays on this trend, noting that the momentum in the denim category is expected to continue through at least the end of 2024. Chen highlighted trends such as head-to-toe denim dressing and artisanal garments, which could drive higher spending in the category. While the broader Western style has gained popularity through its association with music icons and recent fashion releases, Chen noted that a key risk to the trend is whether customers will continue to spend on the look despite potential price increases.
Chen sees reasons to be bullish on clothing makers Levi Strauss and Ralph Lauren beyond just the Western resurgence. Ralph Lauren has seen increased revenue through brand elevation efforts, while Levi Strauss has focused on direct-to-consumer premiumization. Both companies have outperformed the market in 2024, with Ralph Lauren adding around 16% and Levi Strauss surging about 36%. However, market analysts have differing opinions on what to expect next, with the average analyst rating Ralph Lauren as a buy with potential upside of approximately 15%, while expectations for Levi Strauss are more mixed.
Boot Barn is also experiencing a boost in performance, with same-store sales growth expected to accelerate due to increased interest in Western wear. While CEO James Conroy acknowledged the cultural support for the company’s offerings, he noted that data showed few customers were changing their buying habits as a result of recent fashion trends. Despite this, there is potential for Beyoncé’s influence to introduce new customers to Boot Barn. The company recently reported strong fourth-quarter earnings but gave a mixed outlook for future performance in fiscal year 2025. Boot Barn shares have increased almost 40% since the start of 2024, with analysts generally giving the stock a buy rating but predicting flat performance over the next year.
Overall, Chen believes that the denim category will continue to perform well in the near to medium term, driven by trends in Western fashion and increased interest in artisanal garments. Key companies like Boot Barn, Levi Strauss, and Ralph Lauren are positioned to benefit from this resurgence in Western styles, with potential for continued growth through at least the end of 2024. While market analysts have differing opinions on the future performance of these companies, the overall sentiment is positive for the denim category as a whole. Beyoncé’s recent foray into country music, along with other cultural influences, could further boost interest in Western wear and drive higher spending in the category.
