(Story updated to add that Ross Stores reported today that earnings per share grew 23% in its fiscal year ended Jan. 28, on sales growth of 9.4%.)
BOSTON ( TheStreet) -- Investors are discounting the effect of still-high unemployment, rising gas prices and inflation on wealthy consumers' spending habits.
They're driving up the stocks of upscale retailers in anticipation of earnings gains this year, while select off-price discount retailers of branded goods are riding on their coattails.
"Apparel/accessory/luxury" retailing stocks have jumped 25.4% this year through March 9, about three times that of the broader S&P 500. That trend should continue, given consumers spending habits, S&P Capital IQ analysts said in a research note."Momentum in the luxury market will extend into 2012, supported, in part, by increasing consumer awareness of luxury brands in emerging markets such as China," indicating that it's not just wealthy U.S. consumers pushing sales at the luxury brands, but buyers in emerging market countries where more and more people have the money to seek status through brand identity. In an example of that, shares of international luxury-brand apparel and accessories retailer Michael Kors (KORS - Get Report) is the top performer this year in the consumer cyclicals sector as tracked by Morningstar, with a 79% return. The company went public in mid-December and has been on a tear ever since. In contrast, mid-market retailers have rather pedestrian share-price returns this year. Wal-Mart Stores (WMT), the nation's biggest retailer, is up 2.7% this year, and has an average annual return of 10% over the past three years, a period coincident with weakness in the U.S. economy. Rival Target (TGT) has fared better, with a gain of 15% this year and an annual 27% return over three years. But retailers of all stripes are benefiting from investor optimism for the economy and pent-up demand on the part of consumers as stocks in the consumer discretionary sector, which is heavily weighted toward retail, is up an average of 12.8% this year. The industry garners an "overweight" recommendation from S&P, which says it expects "strong emerging market revenue growth and a gradually expanding U.S. economy likely fueling above-average earnings per share growth, enabling market outperformance." Here are eight stocks that are expected to benefit from consumers' free-spending ways this year, in inverse order of share price return: