5 Luxury Goods Stocks for Santa Claus Rally
Bain & Company forecasts 18% growth for watches and jewelry sales in 2011 as consumers are increasingly migrating from unbranded luxury purchases to branded purchases. The firm forecasts 14% growth for brand-owned stores, which is 50% higher than the increase forecast for third-party retailers, and estimates that direct-owned boutiques now represent 30% of luxury sales worldwide.
The luxury good finds a good market in Middle East, as Chinese customers in Gulf have been ranked as the world's No.2 luxury customers behind Americans, according to consultancy Bain & Co. Emerging markets -- such as China, Brazil and the Middle East -- are transforming the luxury industry, with total sales in 2011 expected to top $265 billion. Euromonitor predicts the value of the luxury goods market in the UAE market to increase by 16% in 2011 to $2.31 billion.
The World Luxury Association anticipates notable growth for luxury goods in emerging markets citing improved consumer spending power. China is likely to be the key driver with sales in the country expected to reach $14.6 billion in 2012.
Based on average estimates of analysts polled by Bloomberg, these five stocks have potential upsides ranging from 15% to 65%, with average buy and average hold guidance of 63% and 34%, respectively.
5. Estee Lauder Companies (EL) engages in the manufacture and marketing of quality skin care, makeup, fragrance and hair care products. The company's products have exposure in over 150 countries under the brands Estee Lauder, Aramis, Clinique, Prescriptives, Lab Series, Origins, M-A-C, Bobbi Brown, Tommy Hilfiger, Kiton, La Mer, Donna Karan, Aveda and Jo Malone.
Of the 19 analysts covering the stock, 58% recommend a buy and the rest rate a hold. The stock's average 12-month price target is $127.33, about 15% higher than the current price, according to a Bloomberg consensus.
Net sales for the first quarter of 2012 were reported at $2.48 billion, an 18% increase compared to the same period fiscal year 2011. Net earnings stood at $278.6 million, up 46% from $191.1 million last year. During the quarter, operating margin increased by 310 basis points.
The company's sales guidance for 2012 is between 8% and 10%, at constant currency and earnings per share before restructuring charges to $4.25 to $4.45.
EL is also preparing to implement SAP in over 25 business units over the next two years.
Aramis and Designer Fragrances, a division of the company, has entered into a multi-year agreement with Tory Burch for an exclusive worldwide license for the latter's fragrance business.