Most Popular
1. THE INFLATION MONSTER is Forecasting RECESSION - Nadeem_Walayat
2.Why APPLE Could CRASH the Stock Market! - Nadeem_Walayat
3.The Stocks Stealth BEAR Market - Nadeem_Walayat
4.Inflation, Commodities and Interest Rates : Paradigm Shifts in Macrotrends - Rambus_Chartology
5.Stock Market in the Eye of the Storm, Visualising AI Tech Stocks Buying Levels - Nadeem_Walayat
6.AI Tech Stocks Earnings BloodBath Buying Opportunity - Nadeem_Walayat
7.PPT HALTS STOCK MARKET CRASH ahead of Fed May Interest Rate Hike Meeting - Nadeem_Walayat
8.50 Small Cap Growth Stocks Analysis to CAPITALISE on the Stock Market Inflation -Nadeem_Walayat
9.WE HAVE NO CHOICE BUT TO INVEST IN STOCKS AND HOUSING MARKET - Nadeem_Walayat
10.Apple and Microsoft Nuts Are About to CRACK and Send Stock Market Sharply Lower - Nadeem_Walayat
Last 7 days
Is the US Yield Curve Inversion Broken? - 3rd July 22
New Signs Economic Turmoil Will Prompt Fed to Lose Its Nerve - 3rd July 22
Stagflation With Powell Could Make Gold Price Happy - 3rd July 22
UK Housing Market Analysis, Trend Forecast 2022 to 2025 - Part 2 - 30th June 22
Stock Market Turning the Screws - 30th June 22
How to Ignore Stocks (and why you should) - 30th June 22
Top Tips For Getting The Correct Insurance Option For Your Needs - 30th June 22
Central Banks Plan To Buy More Gold In 2022 - 30th June 22
AI Tech Stock PORTFOLIO NAME OF THE GAME - 29th June 22
Rebounding Crude Oil Gets Far Away from the Bearish Side - 29th June 22
UK House Prices - Lets Get Jiggy With UK INTEREST RATES - 28th June 22
GOLD STOCKS ARE WORSE THAN GOLD - 28th June 22
This “Bizarre” Chart is Wrecking the Stock Market - 28th June 22
Recession Question Answered - 28th June 22
Technical Analysis: Why You Should Expect a Popularity Surge - 28th June 22
Have US Bonds Bottomed? - 27th June 22
Gold Junior Miners: A Bearish Push Is Coming to Move Them Lower - 27th June 22
Stock Market Watching Out - 27th June 22
The NEXT BIG EMPIRE WILL BE..... CANZUK - 25th June 22
Who (or What) Is Really in Charge of Bitcoin's Price Swings? - 25th June 22
Crude Oil Price Forecast - Trend Breaks Downward – Rejecting The $120 Level - 25th June 22
Everyone and their Grandma is Expecting a Big Stocks Bear Market Rally - 23rd June 22
The Fed’s Hawkish Bite Left Its Mark on the S&P 500 Stocks - 23rd June 22
No Dodging the Stock Market Bullet - 23rd June 22
How To Set Up A Business To Better Manage In The Free Market - 23rd June 22
Why Are Precious Metals Considered A Good Investment? Find Out Here - 23rd June 22
UK House Prices and the Inflation Mega-trend - 22nd June 22
Sportsbook Betting Reviews: How to Choose a Sportsbook- 22nd June 22
Looking to buy Cannabis Stocks? - 22nd June 22
UK House Prices Momentum Forecast - 21st June 22
The Fed is Incompetent - Beware the Dancing Market Puppet - 21st June 22
US Economy Headed for a Hard Landing - 21st June 22
How to Invest in EU - New Opportunities Uncovered - 21st June 22
How To Protect Your Assets During Inflation - 21st June 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Luxury Brands Are Back In Style as America's Wealthy Return to Their Wears

Economics / Economic Recovery Jan 20, 2011 - 08:05 AM GMT

By: Money_Morning

Economics

Best Financial Markets Analysis ArticleJason Simpkins writes: The U.S. unemployment rate may still be high, but that hasn't stopped consumer spending from rallying. And in contrast to the darkest days of the financial crisis, when discount retailers like Family Dollar Stores Inc. (NYSE: FDO) and Wal-Mart Stores Inc. (NYSE: WMT) ruled the day, luxury brands have been doing the heavy lifting.

Indeed, bolstered by the extension of the Bush tax cuts and strong demand in Asia, luxury brands are coming back into style.


LVMH Moet Hennessey Louis Vuitton SA (PINK: LVMHF), Burberry Group PLC (PINK: BURBY) and Hermes International SCA (PINK: HESAF) will lift revenue at least 9%, according to estimates compiled by Bloomberg.

Sales at Burberry, a maker of luxury clothing and accessories, rose 27% to $747 million (480 million pounds) in the third quarter ended Dec. 31. Burberry now forecasts full-year adjusted pretax profit of $400 million (250 million pounds) to $464 million (290 million pounds), and predicts that the figure will be near the top end of the estimate. The previous prediction was for profit of $384 million (240 million pounds) to $432 million (270 million pounds).

Sales at Burberry may expand 11% in the fiscal year ending March 2012.

China has been an especially strong market for the company, as third-quarter sales were up 30% in that country. Burberry has been steadily expanding in China, adding 50 stores in July 2010 at a cost of $112 million.

Burberry offers one of the best top-line and margin expansion outlooks in the industry, according to Antoine Belge, an analyst at HSBC Holdings PLC (NYSE ADR: HBC), in a Jan. 6 report.

Burberry stock rose 88% in 2010 amid rising sales and takeover speculation.

Compagnie Finciere Richemont (PINK: CFRUY) – the world's largest jewelry maker and the second-largest luxury goods group behind LVMH – reported a 33% increase in revenue, which climbed to $2.8 billion (1.59 billion euros) during the quarter ended Dec. 31. Sales in the Asia-Pacific region rose 57% from the same period last year.

Richemont warned its fiscal fourth quarter and 2011 results might not be as strong as those of its third quarter because comparisons to 2009 sales won't be as favorable. However, the company should continue to expand so long as the nouveau riche of China keep buying – and most analysts believe they will.

"The rate of growth in Chinese demand for luxury goods should remain unabated," said Belge. "Welcome to the new ‘new normal'."

Luxury demand will probably increase 11% in 2011, Belge said.

Furthermore, wealthy U.S. and European customers continue to be a force.

"High-end consumers in the U.S. and Europe are willing to spend, even in a subdued economic environment," said Belge.

U.S. retail sales rose for a sixth straight month in December. Purchases for the month increased 0.6% after rising 0.8% in November, the Commerce Department said. Sales advanced 6.7% for all of 2010 – the biggest jump since 1999's 8.2% increase.

However, analysts say it's the country's wealthier consumers that are driving sales as lower and middle-class Americans live paycheck-to-paycheck.

"The heavy lifting is being done by the upper-income households," Michael Feroli, a former Federal Reserve economist who is now chief U.S. economist at JPMorgan Chase & Co. (NYSE: JPM) told Bloomberg. "They're the ones benefiting the most from the stock market rally, and they're spending."

The Dow Jones Industrial Average has surged more than 10% in the past year, while the Standard & Poor's 500 Index is up 11.5%.

Wealthy Americans also are benefiting from the extension of the Bush tax cuts. U.S. President Barack Obama on Dec. 17 signed into law an $858 billion bill extending the tax cuts for two years for all income groups, instead of letting them expire for family earnings that exceed $250,000 a year – the cutoff the administration uses for the middle class.

With more disposable income, high-end U.S. consumers have flocked back to the likes of Tiffany & Co. (NYSE: TIF) and Coach Inc. (NYSE: COH).

Tiffany reported a stronger-than-expected holiday season, with net sales for the two months ended Dec. 31 climbing 11% from a year earlier. As with Burberry and Richemont, the company's sharpest growth was in the Asia Pacific region, which saw sales jump 23%, followed by Europe, which was up 13%.

Tiffany last week lifted its per-share forecast for the year ending Jan. 31 by 11 cents, to a range of $2.83 to $2.88. It expects sales approaching $3.1 billion, which would be a 14% year-over-year increase. The company had forecast a 12% sales increase in November.

Tiffany stock has earned 11 "buy" ratings and five "holds," according to Zacks Investment Research.

High-tech retailers also are turning in strong performances. Apple Inc. (Nasdaq: AAPL) on Tuesday reported its best ever financial performance. The company reported revenue of $26.74 billion and profits of $6 billion, or $6.43 per share. Revenue was up 71% from a year ago, and earnings were up 78%. Analysts were expecting revenue of $24.38 billion and earnings per share of $5.38.

Apple sold 7.33 million iPad tablet computers, which range in cost from $500 to $829, in the first holiday season for the device.

On the opposite end of the spectrum, low-cost retailer Family Dollar, which performed exceptionally well in 2008 and 2009, has witnessed a slowdown in traffic. Same-store sales growth slowed to a lower-than-expected 4% in December, below the 6.9% increase seen during the fiscal first quarter, which ended Nov. 27. And the company on Jan. 5 posted a lower-than-expected quarterly profit and gave a forecast for the current quarter below analysts' expectations.

While Family Dollar stock surged nearly 80% last year, it still has a lower Price/Earnings ratio than its high-end counterparts. The stock has a P/E of 16, compared with 21.3 for Coach, 22.9 for Tiffany & Co, and 26 for LVMH.

Still, luxury stocks may get a boost from mergers and acquisitions, as well as improved results.

Analysts speculate that China and Korea will want to tap the rising demand for expensive jewelry and leather bags.

Small and medium-sized brands in Italy will be the most likely targets Jean-Marc Bellaiche, a senior partner at the Boston Consulting Group in Paris and head of the consultant's luxury topic area, told Bloomberg. And investors in Hermes International shouldn't sell their shares, according to HSBC's Belge. It's possible that LVMH, which already has a 20.2% stake in the Birkin bag maker, will move to acquire more of the company.

Source : http://moneymorning.com/2011/01/20/luxury-brands-back-in-style-americas-wealthy-return-to-wears/

Money Morning/The Money Map Report

©2011 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in