From Ferrari to Prada: 9 Best Stocks of Luxury Brands

Investors who want to buy high-end stocks should consider these luxury brands.

It may take hundreds or thousands of dollars to buy luxury products. Fortunately, investors can own shares of the companies that produce those products for only a fraction of the price. Luxury brands will always hold value, and consumers will forever aspire to own luxury products. Luxury brand stocks can be extremely cyclical, making them particularly susceptible to economic downturns and declines in consumer discretionary spending. However, the desire for consumers to own products inaccessible to others always rebounds eventually. Here are nine ways people can invest in some of the most popular luxury brands in the world.

Ferrari NV (ticker: RACE)

Ferrari is a high-performance luxury car maker. The global auto industry is struggling with supply chain disruptions, but you wouldn’t know it by looking at Ferrari’s numbers. Ferrari reported 11.2% net income growth and 17.2% revenue growth in the first quarter. The company also reiterated its full-year guidance of about $5.1 billion in sales, up 13% from last year. Management said the company’s order book “covers well into 2023” and noted that most of its models are sold out. Most automakers produce some luxury vehicle models, but Ferrari is a true pure play on luxury autos.

Ralph Lauren Corp. (RL)

Ralph Lauren produces men’s and women’s apparel, fine watches, jewelry, and other premium lifestyle products. In the most recent quarter, the company generated about 45% of its revenue from North America, 31% from Europe and 23% from Asia. European sales growth was strongest of any region in the fiscal fourth quarter at 26%, and total revenue was up 18% overall. Net income in the quarter was up 132% to $24.4 million. Ralph Lauren reported an impressive 80% digital sales growth on a two-year basis. RL stock also trades at an attractive forward earnings multiple of just 9.1.

Tapestry Inc. (TPR)

Tapestry is the parent company of luxury brands Coach, Kate Spade New York and Stuart Weitzman. The company makes luxury accessories, handbags, footwear, fragrances and other products. In the fiscal third quarter, Tapestry reported 13% revenue growth and $122.7 million in net income. Tapestry shares also pay a 3.1% dividend, and the company is on track to return $1.9 billion to shareholders via dividends and buybacks in fiscal 2022. Tapestry’s overall revenue growth was particularly impressive given ongoing COVID-19 lockdowns in China. TPR stock also trades at an attractive forward earnings multiple of just 7.4.

Fossil Group Inc. (FOSL)

Fossil produces watches, jewelry, handbags, leather goods, clothing and other accessories. In its fiscal first quarter, Fossil reported 4% revenue growth driven by 20% growth in European sales on a constant-currency basis. Global watch sales were up 10% in constant currency. Even though Fossil reported a net loss of $21.5 million in the quarter, the company still repurchased $10 million in stock. Like many of the other brands on this list, Fossil will also benefit from a pandemic recovery in China. Unfortunately, Asia sales dropped 10% in the most recent quarter, and digital sales dropped 17%.

Signet Jewelers Ltd. (SIG)

Signet is the largest specialty jeweler in the world and the parent company of the Kay, Zales and Jared brands. In the first quarter, Signet reported 8.9% sales growth and 2.5% same-store sales growth. The company also grew its international sales by 91.6% in the quarter. Signet reported an $83.5 million net loss, as well, but that included $190 million in charges related to a one-time litigation resolution. Signet shares trade at just 4.8 times forward earnings estimates, making it potentially an attractive luxury stock play for value investors.

Capri Holdings Ltd. (CPRI)

Capri Holdings owns luxury brands Michael Kors, Jimmy Choo and Versace. In the fiscal fourth quarter, Capri reported 24.6% revenue growth, led by 34% growth at Versace. Jimmy Choo and Michael Kors also generated impressive sales growth at 25.8% and 21.8%, respectively. Capri reported net income of $81 million compared with a net loss of $183 million a year ago. In addition, Capri management recently authorized a $1 billion share buyback program that will help support the stock. Finally, CPRI shares are attractively valued, trading at just 6.5 times forward earnings estimates.

RH (RH)

RH, formerly known as Restoration Hardware, is a retailer that specializes in high-end home furnishings, such as lighting, textiles and bathware. In the first quarter, RH reported 11% revenue growth and 54% net income growth. RH said its revenue was up 98% on a two-year basis, one of the highest growth rates in the industry. RH also reiterated its commitment to prioritizing brand value and margins over sales growth. In fact, the company’s gross margins expanded by 4.8% in the quarter. Unfortunately, the market hasn’t rewarded RH’s discipline in 2022. The stock is down 54% in 2022 through June 21, more than any other stock on this list.

Kering SA (PPRUY)

Kering specializes in luxury apparel and accessories, such as leather goods, shoes, watches, jewelry and cosmetic products. Its leading brands include Gucci, Yves Saint Laurent and Bottega Veneta. Kering reported 27% revenue growth in the first quarter, including 20% revenue growth for Gucci, its largest brand. The company said online sales now account for 15% of Kering’s total direct sales. Revenue from directly operated stores was up 32% from pre-pandemic levels in 2019. Management said sales were particularly strong in Western Europe, North America and Japan. Kering should also benefit from easing of COVID-19 restrictions in China in coming quarters.

Prada SpA (PRDSF)

Prada produces luxury leather goods, handbags, footwear, apparel and accessories. Its top brands include Miu Miu, Church’s, Cas Shoe and Pasticceria Marchesi. Prada reported 41% revenue growth in 2021 and said its gross margins were up sharply in the second half of the year. In April, Prada CEO Patrizio Bertelli said the company “did well, above expectations” in the first quarter of 2022 despite headwinds in Russia. Prada shares are down 17.4% year to date, but the stock has outperformed the S&P 500 and is the best-performing stock on this list so far in 2022.

9 best luxury stocks to buy:

— Ferrari NV (RACE)

— Ralph Lauren Corp. (RL)

— Tapestry Inc. (TPR)

— Fossil Group Inc. (FOSL)

— Signet Jewelers Ltd. (SIG)

— Capri Holdings Ltd. (CPRI)

— RH (RH)

— Kering SA (PPRUY)

— Prada SpA (PRDSF)

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From Ferrari to Prada: 9 Best Stocks of Luxury Brands originally appeared on usnews.com

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