3 Stocks Cashing in on the Luxury Market Boom
The luxury market has been incredibly resilient, even amid the past few years of subtle macro headwinds and the bruising wave of inflation that hit consumers right in the wallet. Undoubtedly, the discretionary consumer goods scene isn’t thriving right now.
The entire discretionary scene has been about haves and have-nots. Though the so-called “revenge spending” trend that immediately followed the reopening from COVID lockdowns seems to (mostly) be over with, I do think the luxury market has what it takes to pick up where it left off, even without much assistance from the broader economy.
Furthermore, as headwinds mount, even the most pressured “aspirational” consumers may want to keep up with appearances (or with the Joneses). Moreover, with the rise of buy now, pay later payment services, one who can’t afford a luxury good can now technically afford them.
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Let’s check out three luxury plays that could add a touch of class to investor portfolios as we start a brand-new month.
LVMH Moet Hennessy Louis Vuitton (LVMUY)(LVMHF)
Source: Vietnam stock photos / Shutterstock
LVMH Moet Hennessy Louis Vuitton (OTCMKTS:LVMUY)(OTCMKTS:LVMHF) is the heavyweight champ when it comes to luxury goods. The French company has a wide moat protected by some of the oldest and most respected upscale brands on the planet.
From Louis Vuitton to Dior, LVMH has brands that are sure to make aspirational consumers look and feel rich. Furthermore, with skin in the alcoholic beverage game (with Hennessey) and beauty retail (with Sephora), LVMH is a diversified way to play the luxury market boom.M
Undoubtedly, the boom could take it to the next level as international markets (think China) begin to feel the lift of the astounding growth of their middle classes. Following an impressive fourth-quarter result that saw sales surge 10% year over year, shares of LVMH seem to have their sights set on new highs.
Management is “confident” in the demand for luxury products in 2024. I share the company’s confidence in this new year as things begin to brighten up with a few rate cuts and perhaps some Chinese stimulus. With the potential for continued growth in the new year, the 24.1 times trailing price-to-earnings multiple, I believe, seems a bit too modest given the incredible portfolio of high-end brands that have helped mint Bernard Arnault as the world’s richest man.
Ralph Lauren (RL)
Source: Martin Good / Shutterstock.com
Ralph Lauren (NYSE:RL), the popular consumer products company behind the Polo brand, hasn’t been nearly as hot as LMVH of late. That said, it’s hard not to be intrigued by the name now that it’s more than 110% above its 2020 lows.
Undoubtedly, Ralph Lauren may not be at the level of a Louis Vuitton in terms of splurge-worthy status symbols. However, I am a bigger fan of RL stock and its more palatable valuation at current levels.
At the time of writing, Ralph Lauren stock trades at 18.33 times trailing price-to-earnings, well below that of LVMH. And with a 2.05% dividend yield, RL stock has the more bountiful payout (LVMHUY stock yields just 1.6%). Though Ralph Lauren offers more affordable luxury to its consumers versus one of the LMVH brands, it seems to be a more economically sensitive play.
In any case, the luxury lifestyle play is definitely worth keeping tabs on as the market, as a whole, looks to pick up traction.
Canada Goose (GOOS)
Source: rblfmr / Shutterstock.com
The Canada Goose (NYSE:GOOS) brand is a status symbol in some of the colder climates out there. Even when you’re bundled up for hostile and snowy weather, some folks still want to show off their labels. Furthermore, though the luxury outerwear space is a relatively small (and niche) corner of the luxury market, the firm has been proactively pushing to offer products outside of the outdoor clothing segment.
Thus far, Canada Goose’s expansion beyond outerwear has yet to pay off. The stock remains in a historic rut right now at just shy of $12 per share, off around 82% from its 2018 all-time high of around $68 per share. What will it take for Canada Goose to get its groove back?
It’s hard to say. Perhaps a significant rebound in the Chinese economy paired with its product expansion could do the trick. In any case, it’s hard to imagine things worsening for the Canadian luxury retailer after its latest slide. Despite the epic decline, GOOS stock still isn’t on the bargain rack, with shares going for more than 33 times trailing price-to-earnings.
On the date of publication, Joey Frenette did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Joey Frenette is a seasoned investment writer specializing in technology and consumer stocks. Contributing to the Motley Fool Canada, TipRanks, and Barchart, Joey excels in spotting mispriced stocks with long-term growth potential in a fast-paced market.
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