5 Luxury Goods Stocks for Santa Claus Rally

NEW YORK ( TheStreet) -- Luxury goods sales are proving resilient in an otherwise volatile market. With the holiday season in full swing, luxury goods stores are reporting explosive sales. This trend is expected to continue through the holiday season and into the New Year.

Bain & Company forecasts 18% growth for watches and jewelry sales in 2011 as consumers are increasingly migrating from unbranded luxury purchases to branded purchases. The firm forecasts 14% growth for brand-owned stores, which is 50% higher than the increase forecast for third-party retailers, and estimates that direct-owned boutiques now represent 30% of luxury sales worldwide.

The luxury good finds a good market in Middle East, as Chinese customers in Gulf have been ranked as the world's No.2 luxury customers behind Americans, according to consultancy Bain & Co. Emerging markets -- such as China, Brazil and the Middle East -- are transforming the luxury industry, with total sales in 2011 expected to top $265 billion. Euromonitor predicts the value of the luxury goods market in the UAE market to increase by 16% in 2011 to $2.31 billion.

The World Luxury Association anticipates notable growth for luxury goods in emerging markets citing improved consumer spending power. China is likely to be the key driver with sales in the country expected to reach $14.6 billion in 2012.

Based on average estimates of analysts polled by Bloomberg, these five stocks have potential upsides ranging from 15% to 65%, with average buy and average hold guidance of 63% and 34%, respectively.

5. Estee Lauder Companies ( EL) engages in the manufacture and marketing of quality skin care, makeup, fragrance and hair care products. The company's products have exposure in over 150 countries under the brands Estee Lauder, Aramis, Clinique, Prescriptives, Lab Series, Origins, M-A-C, Bobbi Brown, Tommy Hilfiger, Kiton, La Mer, Donna Karan, Aveda and Jo Malone.

Of the 19 analysts covering the stock, 58% recommend a buy and the rest rate a hold. The stock's average 12-month price target is $127.33, about 15% higher than the current price, according to a Bloomberg consensus.

Net sales for the first quarter of 2012 were reported at $2.48 billion, an 18% increase compared to the same period fiscal year 2011. Net earnings stood at $278.6 million, up 46% from $191.1 million last year. During the quarter, operating margin increased by 310 basis points.

The company's sales guidance for 2012 is between 8% and 10%, at constant currency and earnings per share before restructuring charges to $4.25 to $4.45.

EL is also preparing to implement SAP in over 25 business units over the next two years.

Aramis and Designer Fragrances, a division of the company, has entered into a multi-year agreement with Tory Burch for an exclusive worldwide license for the latter's fragrance business.

4. Limited Brands ( LTD) is a specialty retailer of women's intimate and other apparel, beauty and personal care products and accessories. The company's brands include Victoria's Secret, Victoria's Secret Pink, La Senza, and Bath & Body Works. It operates 2,628 specialty stores in the U.S. and its brands are sold in more than 600 direct-owned and franchised stores worldwide.

Of the 25 analysts covering the stock, 52% recommend a buy and the rest suggest a hold. The stock's average 12-month price target is $45.21, or 15.2% higher than the current price, according to a Bloomberg survey.

Net sales for the third quarter of 2011 stood at $2.1 billion, up 9.5% from the same period last year. Adjusted earnings per share increased 39%, while operating income rose 24.8%. Comparable-store sales grew 8% for the quarter.

For 2011, the company pegs adjusted earnings per share between $2.38 and $2.53.

In November, the company reported a 7% increase in comparable store sales for the four weeks ended Nov. 26, 2011. Furthermore, EL has declared a special dividend of $2 per share, payable Dec. 23.

Sycamore Partners, a New York-based private equity firm, recently acquired a controlling 51% interest in Mast Global Fashions, the third-party apparel sourcing division of Limited Brands.

3. Coach ( COH) is a marketer of fine accessories and gifts for women and men, including handbags, small leather goods, business cases, weekend and travel accessories, footwear, watches, outerwear, scarves, sun wear, fragrance, jewelry and related accessories.

Of the 29 analysts covering the stock, 65% recommend a buy and the rest suggest a hold. The stock's average 12-month price target is $71.32, or 19.1% above the current price, according a Bloomberg consensus.

For 2012 first quarter, the company recorded revenue of $1.1 billion, an increase of 15% from the same quarter last year. Net income for the quarter was up 14% at $215 million, while EPS rose by 16%. Operating income stood at $322 million, growing 13%. Gross profit rose 13% to $765 million. Direct-to-consumer sales were up 17%.

North American comparable-store sales improved 9.2% for the quarter.

Earlier this month, COH became the first U.S- incorporated company to list on the Hong Kong Stock Exchange.

2. PVH ( PVH) is one of the world's largest apparel companies. It owns and markets the iconic Calvin Klein and Tommy Hilfiger brands worldwide. It is the world's largest shirt and neckwear company and markets a variety of goods under its own brands, Van Heusen, Calvin Klein, Tommy Hilfiger, IZOD, ARROW, Bass and G.H. Bass & Co.

For the third quarter of fiscal 2011, PVH reported revenue of $1.65 billion, up 9% from the same quarter prior year. EBITA rose 5% to $227.3 million. Net income stood at $112.2 million, up 12.4%; EPS increased by 10.8%.

Tommy Hilfiger's business grew 17%, while Calvin Klein saw an 11% surge in sales.

For fiscal year 2011, PVH anticipates revenue growth of 26% to over $5.8 billion and non-GAAP earnings per share to increase by 23%.

Of the 15 analysts covering the stock, 80% recommend a buy and the rest suggest a hold. Analysts' average 12-month price target for the stock is $84.00, about 22.8% higher than the current price, according to Bloomberg.

1. Perry Ellis International ( PERY) is a leading designer, distributor and licensor of a broad line of high quality apparel, accessories and fragrances for men and women, as well as select children's apparel. The company licenses its proprietary brands to third parties for the manufacture and marketing of various products in over 50 countries.

Of the 11 analysts covering the stock, 63% recommend buying and 27% suggest a hold. The stock' average 12-month price target is $22.78, about 64.6% higher than the current price, a Bloomberg consensus shows.

For the third quarter of 2012, the company recorded revenue of $248.4 million, up 23% in the same period last year. Gross profit increased 15% to $82.5 million. EBITDA for the first nine months of fiscal 2012 rose 30.5% to $58.6 million, compared to $44.9 million in the prior year.

For fiscal 2012, PERY expects total revenue of $1.0 billion, EBITDA in the $75 million to $80 million range, and EPS at or above $2.00.

Recently, the company announced a $20 million increase to the stock repurchase program.

PEI Licensing, Inc., a wholly owned subsidiary of PERY has entered into an exclusive license agreement with 1928 Jewelry Company to manufacture, design and distribute fashion jewelry products slated to launch in Spring 2012 season.

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