The Wealthy Aren’t ‘Insulated’ When it Comes to Spending
I wrote a story yesterday on two Euro-based luxury item manufacturers and sellers; LVMH which trades on the Paris Euronext (NYSE) and Richemont, owner of the Cartier and Montblanc brands, which trades on the Swiss Stock Exchange. The jist of the story was how these two luxury companies were flourishing; especially in Asia.
Then comes news that U.S. luxury companies Tiffany & Co (NYSE:TIF) and Coach (NYSE:COH) are thriving as well as stock market gains have made the affluent even more so and they are spending money.
Some observers say rich shoppers are fueling the U.S. recovery at this point in time.
Sales are up at both TIF and COH. On the other side of the coin Wal-Mart (NYSE:WMT) has said that “everyday Americans” are living paycheck to paycheck as they await an improvement in job prospects.
Is the ‘heavy lifting’ being done by upper-income households? Well it is at TIF and COH. And this from the Fed Dec 14 minutes: “Consumer purchases reflect bigger gains among high-income households and “financial pressures on those of more-modest means.”
Consumer spending accounts for approximately 70% of GDP and some economists estimate that the top 20% of wage earners are spending 40-50% of retail dollars. Some economists also estimate that the top 20% of income earners own about 80% of equity wealth and half of housing wealth.
You’ve got to love Bloomberg. They have a Retail Sales Luxury Index which jumped 8.1% in Dec YOY and they also have a Bloomberg Retail Sales Discount Index which posted a 0.9% gain. The wealthy win when it comes to retail spending in Dec.
COH is the largest U.S. maker of luxury leather goods. In Oct the Co raised its North America sales forecast for the rest of the year. In anticipation of holiday-season sales, the New York- based company increased inventory by 36%.
TIF will accelerate store openings for 2011, CFO said on a Nov 24 conference call. TIF on Jan 11 forecast profit from continuing operations of as much as $2.88 a share in the year ending Jan 31, up 11 cents from a Nov projection.
One trader told me he owns both TIF and WMT. Nice Hedge.
Tiffany & Co. is a holding company and conducts all business through its subsidiary companies. The Company’s principal subsidiary, Tiffany and Company, is a jeweler and specialty retailer whose principal merchandise offering is fine jewelry. The Company also sells timepieces, sterling silverware, china, crystal, stationery, fragrances and accessories. Through Tiffany and Company and other subsidiaries, the Company is engaged in product design, manufacturing and retailing activities. Its Americas segment includes sales in TIFFANY & CO. stores in the United States, Canada and Latin/South America, as well as sales of TIFFANY & CO. products in certain markets through business-to-business, Internet, catalog and wholesale operations. Its Asia-Pacific segment includes sales in TIFFANY & CO. stores, as well as sales of TIFFANY & CO. products in certain markets through business-to-business, Internet and wholesale operations.