NEW YORK — It seems hard to believe luxury retail spending could maintain such a strong course for so long. While there is evidence on Wall Street of luxury’s potential decline, it’s the individual companies rather than the group as a whole who are showing signs of weakness.

Meanwhile, several luxury companies continue to report and project huge increases in profits and sales.

Stepping back a bit, luxury spending had rebounded sharply in late 2002 — along with the turnaround in the financial markets — and hit full-blown proportions in 2003.

If you believe the strength of luxury spending is tied to the market’s performance, however, high-end retailers could start to see fewer consumers “trading up” for coveted luxury items while loyal customers could begin to limit their spending.

The Dow Jones Industrial Average hit a two and a half year high in late January, nearly eight months ago. The market has been wobbly because high oil prices, the turmoil in Iraq and the uncertain outcome of the presidential election has kept many investors on the sidelines.

Nevertheless, Eric Beder, senior equity analyst at J.B. Hanauer and Co., recently initiated coverage of two luxury retailers — each for different reasons.

The analyst said jewelry and watch retailer Movado Group is “on the money,” but he called Saks Inc. “a compelling value play,” which is in light of the company’s recently reported wider quarterly loss. A stock is considered a value play when the company is in a rough patch, but is expected to turn around. Investors scoop up shares at discounted prices because they’re banking on the company’s operational improvements to consequently boost the stock price. Eventual success, however, is not guaranteed.

Saks’ “results for fiscal year 2004 will remain somewhat mixed, reflecting the cost of a number of key upgrades,” Beder said in a Sept. 13 research note. Shares of Saks have responded in turn to its disappointing news, and at around $12, sit just above their 52-week low of $11.21 reached on Sept. 29, 2003. “Investors have punished the company for the slow pace of the turnaround and Saks’ inability to drive upside in a period of spending frenzy by the high-end shopper and a stanching of bleeding by the department store sector,” Beder said.

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