Luxury Retail Shops: Who’s Still Got It?
Austin is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Movado Group, Inc. (NYSE: MOV) recently reported its fourth quarter earnings. The good news is that earnings and revenue were up. The bad news is that the company adjusted its forecast downward. Is this luxury retail company signaling a decline for high-priced consumer goods?
Movado Group designs, manufactures, and distributes high-end watches. It sells watches under its own brand as well as others including: Coach, Tommy Hilfiger, Lacoste, and Ferrari. It sells watches in various retail outlets and owns its own stores, with 33 outlet stores worldwide.
The most recent earnings were 71% higher than the same quarter for the previous year. Earnings per share were $.41. Even better, the company beat analyst expectations by 57%. Revenues only increased by 1%, which means the company was able to become more profitable this last quarter.
The company dropped its forecast to $1.80 per share in earnings this year. This would represent 11% growth in earnings. This growth rate is much slower than the previous year when it saw a 53% increase in earnings. The company expects a 10% growth in top line revenue, as well. Movado also announced a $.05 dividend per share to be paid in April.
Reports from the Federation of the Swiss Watch Industry said that there was an 18% drop in watch sales in February. This applies to watches in the $200 price range, like Movado watches. Watches that were priced in the $300 range saw an increase in sales, though -- consumers are still purchasing high-end watches.
Even with this decline in some watch sales and the drop in the stock price due to revised earnings estimates, Movado is still a solid company. A realistic price range for this stock is $38-$40. Its future growth, dividend plan and stock buyback plan to the tune of $50 million make it an attractive luxury retailer.
Another luxury retailer to watch is Tiffany & Co (NYSE: TIF). The company beat analyst expectations for the first time in four quarters. Earnings per share were $.04 higher than expected and totaled $1.40 per share.
The main driving force behind the rise in earnings was growth in the Asia-Pacific region. Revenue grew by 13% to $254 million. Sales only grew by 2% in the United States and 3% in Europe. Total revenue for the year grew by 4.14%. Total net income dropped from the prior year. Last year’s net margin was 10.96%, lower than the prior year's 12.05%.
Global brand awareness and international sales will fuel earnings for the next year. Sales in China and other Asian markets should see solid double-digit increases in revenue this year. Investors are discounting the earnings by 4.75% with a valuation at $68.42. With a growth plan of 6% this year, the stock price should grow to $70 per share but not much higher.
It is difficult to discuss jewelry and watches without mentioning Fossil, Inc. (NASDAQ: FOSL). The stock price has had a wild 52 weeks, ranging form $62.77 to $139.20. The company will be affected by the decline in $200 watches like Movado, but its diversified product line will help mitigate this potential decline. Sales are expected to grow by 16% this year with its fashion line including men’s and women’s clothing, jewelry, bags, and accessories. This growth rate could fuel the stock price to $110.60.
Luxury and high-end fashion retailers are still good buys. Stick with these well-established and growing luxury retail stocks and watch the profits come in.
Austin Higginshas no position in any stocks mentioned. He is the Principal Consultant for Avant Venture Group and focuses on building businesses through innovation, growth and investment. Read his company's blog at BuildInvestGrow.com and follow him on Twitter @Austin_Higgins.
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