Breakout

3 Stocks Winning in Luxury Retail

Jeff Macke
Breakout

Retail sales rose 0.4% in June and just 0.1% ex-autos, both numbers well below estimates. The data would be chilling if not for the fact that there's little in the way of supporting evidence from the retailers or the stocks. On Monday the Consumer Discretionary Select SPDR (XLY) hit a 52-week high led by shares of Tiffany (TIF) which gained nearly 4% after an upgrade.

Strength in the consumer isn't exclusive to the U.S. at this point either. Last week shares of London-based Burberry (BRBY.L) spiked after the company beat analyst estimates and expressed optimism about the balance of the year.

Retail expert Hitha Prabhakar is taking her cues from Burberry, not government surveys. "Retailers and especially luxury retailers are definitely on the upswing," Prabhakar says in the attached video. "The fact that (Burberry) beat this quarter and sustained guidance speaks volumes."

Here are three other companies catering to the high-end lifestyle that can make individual investors money today:

Ralph Lauren (RL)

The house of Polo hung onto its pricing and margins through most of the downturn; a strategy serving it well in the recovery. No brand says "ostentatiously casual" as well as Polo. Prabhakar sees promise in the way the company continues to build out its European operations and improve its online efforts here in the States.

Coach (COH)

Last year's man-bag debacle aside, Prabhakar thinks Coach has gotten back its mojo, especially in Asia. Chinese same-store-sales have been strong, and Prabhakar says suddenly wealthy consumers continue to gobble up Western goods.

Under a new CEO Coach has gotten away from all or nothing bets on bags and keychains and into a more sweeping line of products that bespeak a class lifestyle.

Michael Kors (KORS)

The high-end juggernaut has only been public since late 2011 but has made a huge impact on the Wall Street scene. It's Prabhakar's favorite example of high-end stocks that she's taking a shine to. "It's all about the luxury lifestyle," she says. By focusing on that high end "feel" rather than one-off items Kors is built to appeal to shoppers across the spectrum from "affluent" to "really, really affluent."

Think what you will about the people willing to pay $1,200 for a handbag, the company selling the item is getting a pretty big cut. If all three of these stocks continue to work for investors, maybe such luxuries won't seem quite so absurd.

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