Consumer spending on luxury goods continues to ramp up.
The easy monetary policy by the Federal Reserve has created a whole new generation of millionaires, or the “new rich,” as the stock market propels to new records.
The spending on high-end goods in the retail sector was further confirmed on Tuesday after high-end jeweler Tiffany & Co. (NYSE/TIF) delivered an impressive quarter, driven by a rise in global spending. The fact that spending on luxury goods is on the rise globally is bullish.
Recall my recent Profit Confidential article in which I stated that the rich continue to spend (see “Higher Taxes: Who Cares? Not the Rich”). The Shullman Luxury and Affluence Monthly Pulse, which is an excellent metric detailing the spending habits of consumers making over $250,000 annually, suggested that higher taxes will not impact the spending patterns of 61% of those earning over $500,000 annually. (Source: Frank, R., “Wealthy Say Higher Taxes Don’t Hurt Spending,” CNBC, March 27, 2013.)
It appears Tiffany is proving the research correct.
In the first quarter, Tiffany reported a nine-percent rise in its worldwide sales to $895 million. If you looked at the sales numbers on a constant-exchange-rate basis, the increase was 13%. Interestingly, the sales increase was worldwide, which bodes well for Tiffany.
In the main Americas region, sales increased six percent to $408 million, representing 46% of total sales. I feel this allocation will shift, as Tiffany expands its presence in Asia, which currently accounts for about 41% of total sales.
The Asia-Pacific region including China but excluding Japan reported impressive sales growth of 15% year-over-year to $223 million. Tiffany’s key comparable store sales jumped nine percent.
The results from Japan were affected by the weak yen, which made the currency translation impact quite noticeable. Yet sales still managed to rise two percent to $145 million. On a constant-exchange basis, sales in Japan surged 20%, with comparable store sales up a whopping 21%. See what the easy monetary policy in Japan is doing?
Even the economically challenged eurozone region managed to pull off a six-percent increase in sales to $93.0 million, which is good, given the mess in this region.
With the report, Tiffany’s shares surged to a new 52-week high on Tuesday and have outperformed the S&P 500 over the past 52 weeks.
Chart courtesy of www.StockCharts.com
While Tiffany reported excellent results, my favorite luxury-brand stock continues to be apparel and accessories-maker Michael Kors Holdings Limited (NYSE/KORS).
In the handbag area, I continue to favor Coach, Inc. (NYSE/COH), which you can read more about in “These Stocks Benefiting as Rich Spend Lavishly at High-End Retail.”