As trade tensions subside and the market stabilizes, it could be an opportune moment for investors to explore consumer goods stocks that have dropped significantly from their peaks. Despite lingering concerns about tariffs disrupting the economy, three particular companies—Apple, LVMH Moët Hennessy — Louis Vuitton, and Crocs—are positioned favorably for long-term success. Each faces unique challenges but also offers compelling reasons for optimism. Apple’s robust ecosystem and expanding services segment provide strong growth potential. LVMH boasts a collection of luxury brands with enduring appeal, while Crocs seeks to rejuvenate its acquired HeyDude brand through strategic initiatives.
In recent months, Apple's stock has experienced a decline exceeding 20% from its previous highs, primarily due to tariff worries, lagging artificial intelligence (AI) advancements, and possible changes in lucrative search revenue-sharing agreements with Alphabet. However, the tech giant maintains one of the most attractive business models globally, characterized by a tightly integrated ecosystem. While iPhone sales growth may have slowed, there remains a consistent replacement cycle driven by battery life issues and technological upgrades. Moreover, Apple's service segment represents its true strength, encompassing diverse revenue streams such as the App Store, cloud storage, subscriptions like Apple TV, Apple Pay, and Google search ads. This segment is growing rapidly, boasting much higher gross margins than device sales. For instance, last quarter, service revenue increased by 12% with a gross margin of 75.7%, compared to product revenue growth of 3% and a gross margin of 35.9%. Although behind in AI development, Apple historically refines technology for optimal user experience, suggesting future innovation potential. Additionally, despite regulatory risks affecting its default search engine deal with Google, Apple retains significant bargaining power due to its affluent user base.
LVMH Moët Hennessy — Louis Vuitton, the renowned European fashion house, finds itself trading over 30% below its peak prices amid global economic uncertainties. The company owns approximately 75 luxury brands, including iconic names like Louis Vuitton, Christian Dior, Marc Jacobs, Fendi, Bulgari, Tiffany & Co., Moët & Chandon, and Sephora. Recent challenges include weakened luxury spending in China and normalization in its wine and spirits segment, particularly concerning cognac sales in the U.S. and China. Nevertheless, LVMH's flagship brands command immense desirability, providing substantial pricing power and a competitive edge. Given the ongoing trend of rising upper-class populations globally, especially in China, the luxury goods market holds promising long-term prospects. Trading at a forward price-to-earnings (P/E) ratio under 21 times based on 2025 analyst projections, this presents a favorable opportunity for investors interested in luxury brand operations.
Crocs, on the other hand, has seen its stock plummet around 35% from its 52-week high, partly attributed to tariff uncertainties which prompted the withdrawal of full-year guidance despite solid Q1 results. A critical focus for Crocs involves revitalizing its HeyDude brand, acquired in February 2022 for $2.5 billion. Initial expectations for HeyDude as a secondary growth driver faltered due to over-expansion, inventory problems, and operational difficulties. To address these issues, Crocs is combating unauthorized gray market selling, reducing inventory levels, discontinuing price matching, and enhancing marketing strategies. Notable steps include appointing celebrities Sydney Sweeney, Travis Hunter, and Jelly Roll as global ambassadors and establishing a TikTok shop to engage younger demographics. Concurrently, Crocs' eponymous brand continues to thrive, supported by international expansion efforts. In the last quarter, international revenue surged 12.3% in constant currency, with a remarkable 30% increase in China, while overall brand revenue rose 2.4%, or 4.2% in constant currency terms.
Investors now face a pivotal moment to evaluate these stocks amidst easing trade tensions. Apple's diversified revenue streams, LVMH's prestigious brand portfolio, and Crocs' strategic brand rejuvenation endeavors all present intriguing opportunities for those seeking long-term gains. As each company navigates current challenges, their inherent strengths suggest considerable potential for future success.