These Luxury Retailers Have Not Lost Their Luster
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The challenges facing the American consumer have been well documented. The unemployment rate remains stubbornly high, and the onset of higher payroll taxes and the ongoing sequester serve as constant headwinds in the face of the consumer.
All the while, wealth continues to pile up for the high-end consumer. Rising housing and stock markets mean the affluent among us have more money to spend than ever. As a result, luxury retailers have seen their businesses firm and are seeing profits roll in. The following stocks profit handsomely from the continued prosperity of the already-prosperous, and should be on your watch lists.
Stocks to profit from the rich getting richer
As the saying goes, the rich just keep getting richer. One luxury brand capitalizing on this is Tiffany & Co. (NYSE: TIF), which has seen its share price surge from under $60 per share at the beginning of the year to its current level near $80 per share.
Tiffany’s first quarter results gave investors plenty of reasons to cheer. The luxury jeweler reported 9% growth in worldwide sales and 3% net earnings growth. And, management maintained its fiscal 2013 forecast.
Along with its first quarter results, Tiffany also gave investors a 6% dividend increase.
Coach (NYSE: COH) is well-known for its namesake handbags, jewelry, footwear, and accessories. The company operates in the luxury apparel industry and has a premier brand. Coach is in great financial position, with almost no long-term debt.
The company’s third-quarter results were very strong, with earnings rising 10% on the back of a 7% rise in sales.
Moreover, Coach is firmly committed to rewarding its shareholders with strong dividend increases. Coach raised its dividend 33% in 2012, and this year gave its investors a healthy 13% dividend bump.
An interesting play for more growth-oriented investors who don’t mind dipping their toes into a risker play might consider Movado Group (NYSE: MOV), a designer, marketer, and distributor of fine watches.
Movado’s first quarter results were solid, with operating income rising 18%. In addition, the company reiterated its full-year guidance, which calls for 12% sales growth and 20% operating income growth.
Movado pays a token dividend, of about a half percent annualized, so die-hard income investors should prefer Tiffany or Coach. That being said, Movado has a market capitalization under $1 billion, meaning the company has more room to grow than its large-cap peers.
International expansion serves as a growth catalyst
Further growth in profits and dividends will be fueled by growth in the emerging markets.
Tiffany saw 15% sales growth in its Asia-Pacific region, which outperformed its North American segment. And, the company announced it will open its first store in Moscow. Russia is a premier emerging market and a member of the BRIC nations, so an expanded presence there will enhance Tiffany’s reach into faster-growing economies than in North America.
Following the trend, Coach’s international operations outperformed its domestic operations. Coach saw solid 7% growth in North American sales, but its sales in China soared 40% year over year.
Luxury stocks should still appeal to the masses
Not all of us have the financial ability to shop at Tiffany, Coach, or Movado with any regularity. That being said, we don’t have to be left out in the cold entirely. Investors from all walks of life can profit from the continued success of the affluent consumer by buying shares of these highly profitable luxury brands.
Movado is growing faster than its rivals and has a smaller market cap, which may lead to stronger capital gains in the future. On the other hand, Coach and Tiffany pay much stronger dividends to shareholders. These luxury retailers have something to offer everyone, so Foolish investors would be wise to consider all three stocks.
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Robert Ciura has no position in any stocks mentioned. The Motley Fool recommends Coach. The Motley Fool owns shares of Coach and Movado Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!