The record-high inflation, changes in consumers’ spending patterns, and concerns about the Federal Reserve’s monetary policy tightening are slowing down all parts of the economy, including demand for luxury goods. However, some Wall Street analysts are optimistic regarding the growth of luxury goods companies.
“Luxury brands should outperform, as they will likely continue to have pricing power, which will keep margins elevated, and they could see a boost as international travel returns to pre-pandemic levels,” said Zachary Warring, an analyst with CFRA Research.
The global luxury market remains well-positioned for growth, mainly due to the continued resiliency of the world’s wealthiest individuals. According to Bank of America (BAC) U.S. credit & debit card data, luxury spending is up 14% year-to-date. Moreover, rapid digital advancements, growing social media influence, and increasing popularity of e-commerce platforms for purchasing luxury goods should spur the industry’s growth.
According to a report by Global Industry Analysts Inc. (GIA), the luxury goods market is expected to reach $296.90 billion by 2026, growing at a CAGR of 4.8%. The luxury goods market in the United States is estimated at $53.10 billion in 2022.
Luxury goods stocks Ralph Lauren Corporation (RL), J.Jill, Inc. (JILL), and Movado Group, Inc. (MOV) are well-positioned to benefit from the industry’s tailwinds. So, it could be wise to add these stocks to your portfolio.
Ralph Lauren Corporation (RL)
RL designs and distributes lifestyle products in North America, Europe, Asia, and internationally. The company offers apparel, accessories, home products, and fragrances. It operates more than 548 retail stores, 650 concession-based shop-within-shops, 139 Ralph Lauren stores, and 143 Club Monaco stores through licensing partners.
On June 7, RL strengthened its commitment to advancing a circular economy with its new Live On promise, enabling the extended life of its products. The company also announced that its cashmere sweater will be a first-of-its-kind luxury Cradle to Cradle (C2C) Certified product and will be available later this year. These developments might accelerate the company’s growth and boost its revenue streams.
In the fiscal 2022 fourth quarter ended April 2, 2022, RL’s net revenues increased 18.3% year-over-year to $1.52 billion, and its gross profit grew 23.4% year-over-year to $966.10 million. Its operating income rose 243.2% from the prior-year period to $36.80 million. The company’s net income and net income per common share amounted to $24.40 million and $0.34, up 132.9% and 133.7% year-over-year, respectively.
The consensus revenue estimate of $1.84 billion for the fiscal 2023 third quarter (ending December 2022) represents a 1.5% growth from the same period in 2021. The $3.17 consensus EPS estimate for the same quarter represents a 7.8% rise year-over-year. The company has surpassed the consensus revenue estimates in each of the trailing four quarters.
The stock has gained 8.3% over the past month to close the last trading session at $97.94.
RL's POWR Ratings reflect a strong outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
RL has a grade of B for Quality and Value. Within the B-rated Fashion & Luxury industry, it is ranked #18 of 67 stocks. Click here to see RL's additional POWR Ratings (Stability, Growth, Momentum, and Sentiment).
J.Jill, Inc. (JILL)
JILL operates as an omnichannel retailer for women’s apparel under the J.Jill brand in the United States. It provides knit and woven tops, bottoms, dresses, sweaters, footwear, and accessories. The company markets its products through retail stores, a website, and catalogs. It operates more than 249 stores.
JILL's net sales increased 21.7% year-over-year to $157.07 million in the fiscal 2023 first quarter ended April 30, 2022. Its gross profit rose 24.6% from the year-ago value to $109.46 million. The company’s adjusted income from operations grew 169.3% year-over-year to $23.75 million. Its adjusted EBITDA stood at $31.30 million, up 84.9% year-over-year.
Furthermore, the company’s adjusted net income and adjusted net income per share attributable to common shareholders came in at $14.39 million and $1.02, registering a rise of 428.9% and 410% from the prior-year period, respectively.
The $616.80 million consensus revenue estimate for the fiscal year 2023, ending January 2023, represents a 5.4% improvement from the last year. Analysts expect JILL’s EPS for the current year to increase 25.4% year-over-year to $2.67. The company has topped the consensus revenue and EPS estimates in three of the trailing four quarters.
The stock has gained 5.3% over the past six months to close the last trading session at $16.40.
JILL's POWR Ratings reflect a promising outlook. The stock has an overall grade of A, which equates to a Strong Buy in our proprietary rating system.
JILL has a grade of A for Growth, Sentiment, and Quality. It has a B grade for Value. Within the B-rated Fashion & Luxury industry, it is ranked #1 of 67 stocks. Click here to see JILL's additional POWR Ratings (Momentum and Sentiment).
Movado Group, Inc. (MOV)
MOV designs, markets, and distributes watches worldwide. The company operates through two segments: Watch and Accessory Brands; and Company Stores. Its customers include department stores, independent regional jewelers, online marketplaces, licensors’ retail stores, and third-party e-commerce retailers. MOV operates over 51 retail outlet locations.
During the first quarter of fiscal 2023, MOV repurchased approximately 378,400 shares under its share repurchase program. As of April 30, the company has no remaining capacity under the March 25, 2021, share repurchase program and $38 million remaining under the November 23, 2021, share repurchase program. These programs might return value to the company’s shareholders.
In the fiscal first quarter ended April 30, 2022, MOV's net sales increased 21.2% year-over-year to $163.42 million, while its gross profit grew 30.3% from the year-ago value to $22.45 million. Its non-GAAP operating income improved 84.7% year-over-year to $26.06 million. The company’s non-GAAP pre-tax income amounted to $26.03 million, up 86.9% year-over-year.
In addition, its non-GAAP net income attributable to MOV and non-GAAP earnings per share came in at $19.13 million and $0.82, registering increases of 89.6% and 90.7% year-over-year, respectively.
Analysts expect MOV's revenue for the fiscal year 2023 (ending January 2023) to come in at $796 million, representing an 8.7% rise from the previous year. Also, Street expects the company's EPS for the ongoing year to come in at $4.08, representing a growth of 3.6% year-over-year.
Furthermore, the company has surpassed the consensus revenue estimates in each of the trailing four quarters.
MOV’s shares have gained 13.4% over the past month and 16.9% over the past year to close the last trading session at $35.28.
MOV’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall grade of A, equating to a Strong Buy in our proprietary rating system.
MOV has a grade of A for Value and Quality. The stock has a B grade for Sentiment. Within the same industry, it is ranked #4 of 67 stocks. Click here to see additional POWR Ratings (Momentum, Stability, and Growth) for MOV.
RL shares were unchanged in after-hours trading Tuesday. Year-to-date, RL has declined -18.97%, versus a -13.45% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
3 Luxury Goods Stocks That Are Still Buys Amid High Inflation Levels StockNews.com
