As the major global economies witness a robust recovery following a devastating pandemic-induced recession, luxury retail stores and online platforms are expected to see a substantial growth in sales on the back of a surge in discretionary spending. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, surged at an annual rate of 11.4% in the first three months of 2021.
Because consumers are diving into retail shopping again and physical stores are returning to operational full capacity, luxury retailers are expected to generate solid sales growth. With more luxury brands embracing e-commerce platforms to boost their sales amid shifting consumer tastes and preferences, they are expected to benefit significantly.
Given the spending tsunami as the economy ramps up, we think luxury retailers Burberry Group plc (BURBY), Hugo Boss AG (BOSSY), and Signet Jewelers Limited (SGI) are well-positioned to benefit. So, these stocks could be solid bets now.
Burberry Group plc (BURBY)
Based in London, U.K., BURBY manufactures, retails, and wholesales premium products. The company operates through two business segments: retail/wholesale and licensing. It licenses third-party manufacturers and distributors to use the company’s trademarks in their products.
This month, BURBY unveiled an evolution of its TB Summer Monogram collection in a new campaign featuring Naomi Campbell. Designed by Chief Creative Officer Riccardo Tisci, this new summer-inspired collection will be available on the company’s website and in its selected retail stores worldwide from July 16.
BURBY’s operating profit increased 176.2% year-over-year to £521.1 million ($721.11 million) in its fiscal year ended March 27, 2021. Its net income grew 209.1% from its year-ago value to £375.9 million ($520.18 million), while its EPS increased 110.1% year-over-year to £92.7 ($128.28) over this period. The company’s net cash from operating activities increased 29.8% from its year-ago value to £455.8 million ($630.74 million).
Analysts expect BURBY's revenue to increase 14.2% year-over-year to $3.76 billion in its fiscal year 2022. The stock has gained 51.1% over the past year and 46.8% over the past nine months.
BURBY’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
BURBY is rated an A grade for Quality, and a B for Stability and Momentum. Within the A-rated Fashion & Luxury industry, it is ranked #22 of 66 stocks.
To see additional POWR Ratings for Growth, Sentiment, and Value, for BURBY, click here.
Hugo Boss AG (BOSSY)
Headquartered in Metzingen, Germany, BOSSY designs, markets, and distributes men's and women's clothing, shoes, and accessories internationally. With approximately 7,350 sales points, it advertises and distributes its items under the BOSS and HUGO brand names through online retailers, freestanding stores, shop-in shops, and factory outlets.
In April, BOSSY announced the expansion of its online store in 12 additional markets, including South Korea, Russia, and the United Arab Emirates, allowing people to explore and shop for the company’s latest collections online. This expansion may help the company to boost its revenue growth in the near term.
In the first quarter, ending March 31, 2021, BOSSY’s sales for its Asia/Pacific segment increased 36.5% year-over-year to €101 million ($119.39 million). Its operating expenses declined 17.4% year-over-year to €300 million ($354.62 million). The company's cash and cash equivalents increased 20.6% from their year-ago value to €123 million ($145.40 million) over this period.
Analysts expect BOSSY's revenue to increase 22.4% year-over-year to $2.86 billion in its fiscal year 2021. The stock has surged 110.1% over the year and 72.6% year-to-date.
According to the POWR Ratings, the stock has a B grade for Momentum and Quality. In the Fashion & Luxury industry, it is ranked #40 of 66 stocks.
In total, we rate BOSSY on eight different levels. Beyond what we’ve stated above, we have also given BOSSY grades for Growth, Stability, Sentiment, and Value. Get all the BOSSY ratings here.
Signet Jewelers Limited (SIG)
SIG operates through three segments: North America; International; and other, and sells diamond jewelry, watches, and other products. The company’s jewelry store is operated under Jared the Galleria of Jewelry, Piercing Pagoda, and Peoples Jewelers' brand names. It operated 2,833 shops and kiosks as of January 30, 2021, including 2,381 in the United States and 100 in Canada. SIG is based in Hamilton, Bermuda.
In April, SIG purchased Rocksbox, and by doing so gained a major footing in a growing online service that caters to next-generation jewelry buyers. The acquisition is part of the company’s strategy to boost its growth in the services category.
During the first quarter, ended May 1, 2021, SIG’s sales increased 98.2% year-over-year to $1.69 billion. Its gross margin grew 232.2% from its year-ago value to $678.4 million. The company's net income came in at $129.8 million, versus a $205.3 million net loss in the first quarter of 2020. Its EPS came in at $2.23 compared to a $3.96 loss per share in the prior-year period.
SIG is expected to witness 27.8% revenue growth for the current year. Its EPS is estimated to increase 236% year-over-year to $7.09 in 2021. Over the past year, SIG’s stock has gained 508.7%, and it has gained 157.8% so far this year.
SIG’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. SIG has an A grade for Value, Growth, and Momentum. Among the 12 stocks in the industry, it is ranked #66.
Click here to see the additional POWR Ratings for SIG (Sentiment, Quality, and Stability).
BURBY shares were trading at $27.11 per share on Friday afternoon, down $1.52 (-5.31%). Year-to-date, BURBY has gained 12.58%, versus a 16.84% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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