- LATIN AMERICA
- MIDDLE EAST
- United Kingdom
- United States
- New Zealand
- South Africa
Luxury retailers such as
It is one way that an average investor can benefit from spending patterns of the well-to-do.
These companies aren't infallible, but recent earnings have been strong and they have loyal customers who are under less economic pressure than most people. Their high-quality brands are expanding globally with more room to grow, especially in brand-conscious China.
"The high-end customers are the last to pull back on spending during an economic downturn, so these stocks do OK," observed Jason Asaeda, retail and brand analyst with S&P Capital IQ in New York. "The sector has been stable and growing, so I'm fairly optimistic about the holiday prospects."
New York-based Coach (COH) has hundreds of stores in North America, Japan and China. It is expanding internationally, a prime example being its first European flagship store launched this fall in London on New Bond Street. It is increasing its men's products throughout all its stores as well as through its dedicated men's stores.
The company has sometimes been underestimated because it used to be focused on the U.S. market. It attracts more "aspirational" customers than the very highest-priced luxury retailers because some of its products have lower prices.
"I really like the stock of Coach, which is doing well in the U.S., China and the rest of Asia," said Mark Mandel, specialty retail analyst with
Coach, whose stock is recommended by Mandel and Asaeda, does not mark down merchandise in its retail stores, they pointed out. The largest portion of goods in its factory outlet stores is designed for that discount purpose, and items sold in department stores are a different assortment than those in Coach stores.
"All the big publicly traded luxury goods companies are very international and are seeing strong growth," said Paul Swinand, equity analyst with
Tiffany (TIF), recommended by Asaeda, is another New York-based luxury retailer that does not mark down merchandise. Since the financial crisis, Tiffany has retained high-end consumers who buy its "statement" jewelry, a profit center that has remained strong. However, many U.S. customers who buy less over-the-top pieces haven't come back, Asaeda said.
Tiffany's "little blue box" commands a premium because of the firm's long-standing reputation. It has control of its supply chain because it is such a large buyer of diamonds. Tiffany at mid-year reported it had 236 stores that included 98 in the Americas, 55 in Japan, 52 in Asia-Pacific and 31 in Europe. It has significant growth potential in China and Europe and will, for example, open its first
"For Coach and Tiffany, even if China's economy slows down, there are still additional geographies for them to tackle," said Swinand.
"The strongest grower among luxury retailers is definitely
Seattle-based, high-end retailer
Successful reintroduction of the
Retailing at any level has its risks, but brands known worldwide for quality and exclusivity will continue to grow in large part because emerging-market consumers are on a mission to seek out the "best" in everything. Luxury retailers in turn have potential to reward their shareholders even during worrisome times.
Investing - Luxury Retailer Stocks Primed for Holidays