Investors should take heed of the challenges facing the luxury goods segment in 2024, particularly regarding certain high-end retail stocks that are struggling. These brands exhibit declining fundamentals and uncertain growth prospects, signaling the need for discernment and possibly a shift in investment strategy.

Here are three high-end retail stocks that investors should consider selling this February.

Tapestry (TPR)

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Tapestry (NYSE:TPR), the owner of brands like Coach, Kate Spade, and Stuart Weitzman, saw record earnings per share (EPS) in Fiscal Year 2023, with net income rising to $936 million from the previous year’s $856 million. However, a drop in revenue to $6.66 billion from $6.68 billion suggests potential headwinds.

It is currently navigating a risky strategy, including the suspension of its share repurchase program due to the planned acquisition of Capri Holdings, with the aim of reaching a leverage target under 2.5x on a gross Debt/EBITDA basis within 24 months post-acquisition.

Wall Street analysts believe TPR is fairly valued at its current levels. With a negative net cash position of -$8.19 per share, the stock carries substantial financial risks, making it a relatively unattractive option compared with its peers. This positions it as one of the high-end retail stocks to sell.

Kering (PPRUY)

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Kering (OTCMKTS:PPRUY) saw a 4% revenue decline in 2023 to €19.6 billion and anticipates pressure on 2024 results due to investments in its brands, particularly Gucci. The company’s focus on revitalizing Gucci and expanding into beauty with Kering Beaute and Creed acquisition is central to its strategy.

The group experienced a 9% drop in sales for the third quarter, with its flagship brand, Gucci, and other labels like Saint Laurent and Bottega Veneta also seeing declines. These adverse figures are attributed to a slowing appetite for high-end clothes and accessories, and efforts to take distribution in-house to reduce promotions and move its labels upmarket, which is yet to yield the expected benefits.

Kering anticipates a decrease in operating income for 2024, particularly in the first half, prompting a slew of analyst downgrades for the stock, including by Piral Dadhania from RBC Capital, lowering it to €480 from €500.

Brilliant Earth Group (BRLT)