Analysts also noted that improving the results of Tiffany and Coach is a strong Japanese yen relative to the dollar, which gives greater buying power to Japanese tourists when they buy goods in the U.S. On the other hand, the yen has fallen against the euro, raising the prospect of further price increases by European luxury brands in the key Japanese market. As a result, retailers like Takashimya are ordering up to 10 percent less from European design houses for fall.
Eric Beder, a retail analyst with Northeast Securities, said investors “love growth and right now this is the highest growing category by far.” Saks Inc., Neiman Marcus and Coach are nailing solid double-digit, top-line expansion along with margin growth, which equals even higher earnings growth. “That is the ideal investment for the investor,” he said.
With Neiman Marcus, Beder said the Dallas-based luxury retailer offers a premium way for investors to play for growth in the luxury-goods sector at the retail level. “People see a company that is focused on the high-end and that utilized the down times to significantly improve its shopping experience,” he said. “Neiman Marcus is now reaping the rewards of that through double-digit same-store sales, beating Wall Street estimates by significant levels and, going forward, opening new stores, including San Antonio, Boston and Boca Raton.”
Beder said the “luxury sector is in the third inning of this high-end baseball game. Last fall was really the catalyst, and I am seeing the growth continue this spring.”
John Lonski, economist at Moody’s Investors Service, noted that stock-market gains along with the robust housing market are benefiting key retailers. “Those consumers that were already doing fairly well did even better,” he said. “Those with high-paying jobs were able to spend. The benefit flow to specialty high-end retailers reflected the increased wealth of [some] American consumers.”