BOSTON (TheStreet) -- Tiffany & Co. (TIF) - Get Tiffany & Co. Report and Coach (COH) recently hit all-time highs.

The U.S.-based luxury purveyors have rebounded surprisingly quickly from the Great Recession. Spendthrift Americans are back with vigor, and emerging-market demand for esteemed U.S. brands is stronger than analysts have anticipated.

In a recovery defined by weak consumer spending and 9.6% unemployment, upper-echelon retailers are performing well, both as companies and as investments.

Barclays Capital

expects this trend to continue. Its 2010

Holiday Outlook

has a well-articulated investment thesis: overweight luxury. Barclays is predicting stronger-than-expected industry performance, forecasting a 3.4% November increase in its Broadlines and Department Stores Monthly Same-Store Sales Index. However, it is predicting a modest decrease in profit margins due to rising costs.

Bullishness abounds for the luxury segment. Barclays expects



, owner of Saks Fifth Avenue, to deliver fourth-quarter comparable sales growth of 5.5%. It predicts a 5% gain for both Coach and

Polo Ralph Lauren

(RL) - Get Ralph Lauren Corporation Class A Report

. Although Barclays is only forecasting a 2% gain for Tiffany, it still ranks the jewelry specialist's stock "overweight" and boosted its price target to $64 on Monday. Tiffany will report fiscal third-quarter results before the open today. Barclays is conceding that its earnings per share forecast may prove too conservative. Tiffany has exceeded the sell-side consensus earnings target in nine of the past 10 quarters.

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Barclays' $64 target suggests that Tiffany's stock has 11% of upside. Shares sold off yesterday, falling 2.7% as the

S&P 500

dropped 1.5%. For those looking to buy on the cheap, now is the time to pay attention. Analysts are bullish on Tiffany, with roughly 67% of researchers ranking its stock a "buy." The only sell-side firm with a higher target than Barclays is


, which expects the stock to tag $65. Coach is the other consensus luxury buy. It receives favorable ratings from 77% of analysts. It offers more upside than Tiffany does.

Tiffany's stock has already passed analysts' median price target. Coach, on the other hand, is still 4% below the median 12-month estimate. Barclays predicts that Coach's shares will advance 10% to $60, valuing the equity at nearly 19 times the bank's 2012 earnings estimate, which may, again, prove conservative. Coach has beaten researchers' profit consensus in nine of the past 10 quarters and exceeded revenue expectations in eight of those quarters.

On Oct. 26, Coach reported fiscal first-quarter results. Net income rose 34% to $189 million. Earnings per share climbed 43% to $63 cents, boosted by a smaller float. Shares outstanding decreased from 319 million to 296 million as the company repurchased and retired roughly $137 million worth of equity. About $422 million remains under the existing repurchase program. Quarterly sales grew 20% to $912 million. The gross margin extended from 72% to 74%, helped by lower sourcing costs. The operating margin stretched from 29% to 31%.

Coach's cash balance dropped 28% from the year-earlier tally, but is still ample. The balance sheet houses $712 million of cash and equivalents, converting to a quick ratio of 1.5, and just $25 million of debt. Direct-to-consumer sales jumped 19% during the quarter while U.S. comparable-store sales climbed 8.5%. China comps remained in double-digit territory. Eight new China stores opened during the quarter, bringing the country total to 49. Although Coach is hyping its men's initiative, China and other emerging markets represent the most lucrative growth venues. Escalating economic growth and a burgeoning middle class are tailwinds in developing markets.

Coach declared a quarterly cash dividend of 15 cents, converting to an annual yield of 1.1% and a payout ratio of 24%. Tiffany pays a dividend of 25 cents, translating to an annual yield of 1.7%.


stock model, which uses a quantitative methodology to evaluate equities, rates both stocks "buy."

-- Written by Jake Lynch in Boston.

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