It's been yet another windy year for the fashionable clothing stocks. I guess you can say they've gone out of fashion. But that's exactly why contrarian Canadian investors may wish to give them a bit more attention as we head into a new year, one that could finally see the consumer more open to spending on discretionary items, most notably apparel.

In this piece, we'll cover two Vancouver-based fashion icons in Aritzia (TSX:ATZ) and Lululemon (NASDAQ:LULU). Both names are heavily out of favour, but may have the means to recover over the longer term. Of course, the consumer can be pretty tough to get a read on. In any case, I'm a fan of the following brands and think they're worth a second look in this kind of environment.

Aritzia

Aritzia is a fantastic clothing retailer that's been hot in 2024, surging more than 83% year to date. Undoubtedly, the explosive rally still puts the name nearly 27% off its 2022 all-time highs, levels that I think could realistically be breached in the new year if Canada's economy can improve.

Despite the hot surge, ATZ stock has been a wild mover, now down over 11% from its 52-week highs. I think the correction is more than buyable if you believe in management's ability to lift its growth ceiling higher in the U.S. market over the next five years.

The balance sheet is in great shape, and so is the growth outlook in the U.S. market. While I wouldn't take it as far as to refer to Aritzia as the next Vancouver-based apparel chain to take the world by storm, I certainly wouldn't be all too surprised if Aritizia were to become as well-known as Lululemon by 2030. For a mere $5.1 billion firm, there's ample upside, at least over the extremely long term.

Lululemon

Lululemon stock has been on the mend since the late summer, bouncing off lows by nearly 40%. Despite the hot move, shares of LULU are still off more than 36% from their highs. And I'm not sure what to make of the name as it moves into quarterly earnings season with so much share price momentum behind it.

While expectations are still mild, I'd much rather wait for more of a pullback before initiating a position. Indeed, Lululemon's strategic partnerships could bolster sales, but I still think investors need to give the name time to really return to its former glory.

At 25.3 times trailing price-to-earnings (P/E), shares are a tad too rich for my liking. Additionally, you'll have to buy LULU stock in U.S. dollars as it's not a TSX-listed name despite its Canadian roots. At today's exchange rate, I'd argue investors should be in no rush to make a big move.

The bottom line

As rates fall off, inflation (hopefully) backs off, perhaps paving the way for some disinflation (it is worth noting inflation crept back up to 2% in Canada); I do find the branded apparel plays to be among the most intriguing of potential deep-value plays.