This Luxury Retailer Now Affordable?

Should You Take This Opportunity to Buy This Luxury StockThe top one percent are spending and don’t really care about the other 99%. For the retail sector and particularly the luxury-brand stocks, this is welcome news.

High-end jeweler Tiffany & Co. (NYSE/TIF) pleased investors and Wall Street on Wednesday after reporting better-than-expected results and increasing its fiscal 2015 earnings estimate for the second time. Consumers in the Americas, Asia, and Europe are spending in the retail sector.

While Tiffany is now near the top of its 52-week range and near a fair valuation, there are a couple of other luxury-brand stocks that may be worth a look.

In the luxury apparel and accessories area, Coach, Inc. (NYSE/COH), a former darling of Wall Street, is struggling just above its 52-week low. While there could be a speculative contrarian buying opportunity with Coach, the anemic revenue outlook would make me think twice. Fiscal 2015 revenues are estimated to contract 11.4% and rebound a mere 3.3% in fiscal 2016. These are not good metrics; unless you want a speculative trade, I would be looking elsewhere in the retail sector.

For a much better luxury apparel buying opportunity in the retail sector, you could take a look at a stock like Michael Kors Holdings Limited (NYSE/KORS), which is my favorite in this area. The stock is currently struggling and down 18% from its 52-week high of $101.04 on February 25, 2014, which suggests it could be a good buying opportunity

Concerns of slower growth rates have been hurting the stock, but the reality is that the growth continues to be excellent, especially for a company with a market cap of more than $16.0 billion.

Michael Kors has underperformed the S&P 500 with a gain of 15.6% over the past 52 weeks, compared to a 22.7% advance in the broad market index.

Michael Kors Holdings Ltd Chart

Chart courtesy of

While the growth is slowing, the company continues to deliver better results than Wall Street estimates. The seller of high-end handbags, clothing, and accessories in the luxury retail sector has beaten the consensus estimate in four straight quarters.

In the fiscal first-quarter earnings season, Michael Kors delivered a 43.4% year-over-year jump in sales to $919.2 million and beat the earnings estimate after reporting earnings of $0.91 per diluted share, $0.10 above the Thomson Financial consensus estimate.

The issue is that the revenues in the recent fiscal first quarter declined from more than $1.0 billion in the previous fiscal third quarter; however, they have still grown over the previous quarter.

Michael Kors reported fiscal first-quarter revenues surging 30% in the North American retail sector, including an 18.7% jump in comparable store sales. In the European retail sector, the company’s products are sizzling hot with revenue growth of 128% and comparable store sales growth at a staggering 54.2%.

For fiscal 2015, Thomson Financial estimates predict revenue growth of 31.0% for FY15 and 21.4% for FY16—a slower growth rate, but still pretty impressive.

I would not bet against Michael Kors in the luxury retail sector.