A renaissance in Western styles can boost stocks that specialize in denim, according to TD Cowen.
Analyst Oliver Chen hailed the jean-fabric category as a strong performer that should be able to keep up momentum through at least the end of 2024.
TD COWEN’S TOP DENIM PICKS
| TICKER | STOCK | YEAR-TO-DATE PERFORMANCE (%) | AVERAGE ANALYST’S RATING | UPSIDE/DOWNSIDE TO AVERAGE PRICE TARGET (%) |
|---|---|---|---|---|
| BOOT | Boot Barn | 39.5 | Buy | -0.3 |
| LEVI | Levi Strauss | 35.9 | Hold | -2.5 |
| RL | Ralph Lauren | 15.9 | Buy | 15 |
Chen highlighted trends around head-to-toe denim dressing and artisanal garments, which can drive higher spending in the category. This comes as the broader Western style — of which denim has typically been considered a centerpiece — has garnered popularity through its association with music icons and a Louis Vuitton line that debuted earlier this year.
Specifically, the look won attention as attendees of Taylor Swift’s high-flying Eras tour emulated “The Tortured Poets Department” singer’s early days in the country genre. It got another boost from fellow popstar Beyoncé’s “Cowboy Carter,” the chart-topping country album released earlier this year.
But a key risk to the trend is if customers are still willing to spend on the look amid price increases, Chen noted.
Playing the denim revival
For clothing makers Levi Strauss and Ralph Lauren, Chen sees reasons to be bullish beyond just a Western resurgence.
Ralph Lauren has juiced average unit revenue through a push to elevate the brand, while gross margins and return on invested capital have climbed to record highs, Chen said. And Ralph Lauren’s “strong heritage” in Americana and Western will also benefit U.S. comparable sales numbers.
Meanwhile, the analyst said Levi Strauss’ direct-to-consumer premiumization efforts are something investors should watch. The company’s jeans line was referenced in the “Cowboy Carter” song “Levii’s Jeans,” which management previously said underscored the brand’s position in culture.
Both stocks have outperformed the market in 2024, with Ralph Lauren adding around 16% and Levi Strauss surging about 36%.
But Wall Street diverges on what to expect next. The average analyst has a buy rating with a price target that suggests Ralph Lauren has upside of approximately 15%. On the other hand, Wall Street expects Levi Strauss to pull back by more than 2% and the majority rate the stock a hold.
While Boot Barn is also feeling a boost, it isn’t quite clear there’s a specific catalyst at work.
Chen said Boot Barn’s same-store sales growth should reaccelerate from the increased interest in Western wear. While CEO James Conroy acknowledged the flood of cultural support for looks that Boot Barn specializes in, he pointed to firm data showing very few customers were changing buying habits as a result of Beyoncé’s project.
