ANALYST SEES PROMISE IN LUXURY GOODS STOCKS
NEW YORK — Stock prices of luxury goods firms have lagged the market in recent months, but there could be a turnaround in the making, according to one market analyst.
According to a research report by retail analyst Kimberly Walin of Furman Selz, the outlook for luxury goods stocks has brightened considerably. She points out that the sharp drop in the Gucci Group stock late in September put downward pressure on other luxury stocks.
“We expect high-end and luxury goods stocks could begin to outperform between now and the yearend since, despite the recent stock action, operating trends seem to be accelerating so far in the fall season and valuations are compelling,” the report said.
Specifically, the report sees opportunity in the stocks of Gucci, Neiman Marcus Group, Polo Ralph Lauren Corp., Tiffany & Co., Saks Holdings and the Movado Group.
Walin said that for investors prepared to look at “out-of-favor names” she would be an “aggressive” buyer of Saks and Gucci. She added that, while there are concerns about Saks’ ability to meet consensus earnings expectations in the third quarter (29 cents a share), she expects Saks to perform well in the holiday season and the stock price is right for purchase. As for Gucci, Walin said the stock is selling well below the valuations for Hermes and LVMH “despite superior margins and similar first-half growth.” She added that while the slowdown in sales gains “was clearly disappointing” the company still generates “impressive sales numbers.”
“We believe that the brand appeal is very much intact.”
Turning to Polo Ralph Lauren, Neiman’s and Tiffany, she said all three have the ability to exceed the consensus estimates, and at current prices they are at a good value. The third-quarter consensus for Lauren is 43 cents a share against 33 cents a year ago; Tiffany, 31 cents against 26 cents, and Neiman’s, 67 cents against 62 cents.
She said Movado is “attractively priced” and noted that she expects future growth from the recent licensing agreement with Coach, which is on track for a spring 1998 launch. For 1997, she expects Movado’s earnings to grow 27 percent on a 14 percent sales increase.
Walin’s estimates for 1997 are $3.07 a share for Gucci against $2.76 a year ago; Saks, 88 cents against 75 cents, and Tiffany, $2.05 against $1.67.
For Neiman’s, she expects $2.05 for fiscal 1998, up from $1.80 earned in the fiscal year ended in July 1997. Lauren should earn $1.13 in the year ending in March 1998 compared with 89 cents earned in the year ended March 1997.
Stock prices in the Furman Selz report are as of Sept. 30 when Gucci was selling at 46 7/8. On Tuesday, Gucci closed at 46 1/2.
Neiman was at 32 at the end of September and closed at 32 13/16 on Tuesday. Polo Ralph Lauren was 26 3/16 and closed Tuesday unchanged from the report date.
Saks was up to 22 7/8 on Tuesday compared with 20 7/8 on Sept. 30. Tiffany was also up, closing Tuesday at 44 compared with 42 1/2. Movado closed Tuesday at 20 3/4 against 19 3/4 at the end of last month.