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4 Luxury Goods Stocks to Buy in a Booming U.S. Economy

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The global luxury goods market is poised to grow at a faster pace in 2018. The last year saw luxury goods sales putting up an impressive show, growing 6%. According to a consultancy firm Bain & Company, the trend is likely to continue, driven by higher tourism and online spend. Also, an increasing number of millennials are willing to spend more, which will be integral to driving sales of personal global luxury goods such as handbags, shoes and clothing.

Understandably, after a robust 2017 and a splendid first quarter, U.S. luxury goods’ stocks seem poised for a great year thanks to optimism surrounding steady economic growth, lower tax rates, higher consumer confidence, strong wage growth, and a 18-year-low unemployment rate. Given this scenario, it makes good sense to indulge in luxury goods’ stocks. 

Favorable Economic Scenario

The S&P Global Luxury Index is up 5.41% on a year-to-date basis, driven by an increased number of millennials willing to spend on personal luxury goods and high tourist spending. Local consumption of personal luxury goods rose 4%, while tourist consumption grew 6%. Moreover, the online market for luxury goods continues to gain ground, thereby pushing up sales.

Also, a bullish economic outlook, high wages, an 18-year-low and high consumer confidence bode well for the luxury goods market. The U.S. consumer confidence increased to a 17-year-high of 128 in May, while retail sales increased 0.8% in May, its biggest advance since November 2017.

Moreover, according to Bain & Co, the global luxury goods market is expected to grow at a compound annual rate of 4-5% over the next three years, while the personal luxury goods market is expected to reach €295-€305 billion by 2020.

Luxury Goods Market on Solid Ground

According to Bain & Company, global sales of luxury goods are expected to grow between 6% and 8% in 2018. This puts the market between $231 billion to $327 billion by the end of this year. Per the report, the United States benefited from a weaker dollar during the last holiday season, which saw increased spending on personal luxury goods.

Moreover, the United States witnessed robust growth in sales of luxury goods in 2017 because of increased tourist spending. The market is expected to grow 3-5% in 2018. The report also stresses that it’s not only the price increases but volumes that is driving the market.

According to a Transparency Market Research report, the global luxury goods market is expected to cross $374.85 billion by the end of 2020. It is being led by the apparel and leather goods segment followed by luxury watches, luxury pens, tableware, jewelry, fragrances and luxury personal cosmetics. It goes without saying that people are not hesitant about spending that has resulted in a considerable rise in sales of luxury goods.

Our Choices

Luxury goods stocks have been doing well for some time now. Moreover, with positives such as a recovering economy, lower tax rates and business-friendly policies, high consumer confidence, and robust consumer spending, luxury brands are poised for growth in 2018.

While binging on luxury goods’ stocks looks like a smart option now, picking winning stocks may be difficult. We have narrowed down our search to the following stocks based on a good Zacks Rank and other relevant metrics.

Tiffany & Co. (TIF - Free Report) designs, manufactures and retails fine jewelry as well as other branded merchandise.  

The company has expected earnings growth of 13.6% for the current year. The Zacks Consensus Estimate for the current year has improved by 7.3% over the last 60 days. The stock carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Movado Group Inc. (MOV - Free Report) is one of the world's premier watchmakers. Movado Group designs, manufactures and distributes watches from 10 of the most recognized and respected names.

Movado Group has a Zacks Rank #1. The company has expected earnings growth of 20.5% for the current year. The Zacks Consensus Estimate for the current year has improved by 7.6% over the last 60 days.

Fossil Group, Inc. (FOSL - Free Report) is involved in designing, marketing and distribution of consumer fashion accessories. 

Fossil Group has a Zacks Rank #2 (Buy). The company has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved by more than 100% over the last 60 days.

Canada Goose Holdings Inc. (GOOS - Free Report)  is a global outerwear brand. Canada Goose is a designer, manufacturer, distributor and retailer of premium outerwear for men, women and children. 

Canada Goose Holdings has a Zacks Rank #2. The company has expected earnings growth of 22.7% for the current year. The Zacks Consensus Estimate for the current year has improved by 19.1% over the last 60 days.

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