8 Stocks Rising Fast on Rich People's Spending (Update2)

(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) 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:

8. V.F. Corp. ( VFC)

Company profile: V.F., with a market value of $16 billion, is the world's largest apparel manufacturer. It makes and markets jeans, sportswear, outdoor apparel, and footwear. Brands include Lee, Wrangler, The North Face, Nautica, Timberland and SmartWool. About 35% of revenue is international.

Investor takeaway: Its shares are up 17% this year and have a three-year, average annual return of 43%. Analysts give its shares nine "buy" ratings, four "buy/holds," and nine "holds," according to a survey of analysts by S&P. It's expected to earn $9.38 per share this year and that that will grow by 15%, to $10.80, next year.

7. TJX Cos. ( TJX)

Company profile: TJX, with a market value of $29 billion and a projected dividend yield of 2%, is a leader in off-price retailing with revenue of $22 billion last year. It has about 3,000 stores and is used many times by branded apparel manufacturers and retailers as an outlet to dispose of excess inventory.

Investor takeaway: Its shares are up 18% this year, and 32% in the past three months and have a three-year, average annual return of 46%. Analysts give its shares 12 "buy" ratings, nine "buy/holds," and 11 "holds," per S&P. It's expected to earn $1.99 per share this year growing by 16% to $2.30 next year. It reported that February sales rose 12% year-over year, to $1.6 billion, with same-store sales rising 9%. Its CEO said that very favorable weather patterns during the month helped boost demand for spring apparel and there was "excellent performance across the board."

6. Ross Stores ( ROST)

Company profile: Ross Stores, with a market value of $13 billion, is one of the largest off-price retailers of brand-name apparel and home accessories in the U.S. It operates over 1,000 "Ross Dress for Less" stores, and 90 dd's Discounts stores. S&P looks for sales of $8.6 billion in fiscal 2012 (ended January 31) and $9.3 billion in fiscal 2013.

Investor takeaway: Its shares are up 20% this year and have a three-year, average annual return of 52%. Analysts give its shares nine "buy" ratings, four "buy/holds," and 16 "holds," according to a survey of analysts by S&P. Ross Stores reported today that earnings for the fiscal year ended Jan. 28 grew 23% to $2.86 per share on sales growth of 9.4% to $8.6 billion. It's earnings are expected to grow 20% in 2013, according to analysts.

5. Luxottica Group ( LUX)

Company profile: Italys' Luxottica Group, with a market value of $17 billion, is the world's largest manufacturer of sunglasses and prescription eyewear, and is also the world's biggest eyewear retailer. At year-end, it had about 7,000 retail stores worldwide.

Morningstar notes that it's also one of the largest managed vision care operators in the U.S., through EyeMed, and is the second-biggest lens finishers through its labs at LensCrafters' retail locations.

Investor takeaway: Its shares are up 28% this year and have a three-year, average annual return of 41%. Analysts give its shares one "buy" rating, two "holds," and one "weak hold," according to a survey of analysts by S&P.

4. Coach ( COH)

Company profile: Coach, with a market value of $23 billion, is a manufacturer, distributor, and retailer of branded handbags and leather accessories. Although North America is about 60% of its sales come from its North American retail and outlet stores, Asia represents its fastest-growing market.

Investor takeaway: Its shares are up 29% this year and have a three-year, average annual return of 76%. Analysts give its shares 13 "buy" ratings, eight "buy/holds," nine "holds," and one "weak hold" rating, according to a survey of analysts by S&P, which itself has it rated "strong buy." For fiscal 2012, analysts estimate it will earn $3.52 per share and that that will grow by 17%, to $4.11 in 2013.

3. Ralph Lauren ( RL)

Company profile: Ralph Lauren, with a market value of $17 billion, makes and sells a wide range of apparel and accessories with brands that resonate with affluent consumers including: Polo, Ralph Lauren Purple Label, Ralph Lauren Black Label, Blue Label, Lauren, RLX, and Chaps. It has recently expanded into handbags, footwear, and denim products.

Investor takeaway: Its shares are up 30% this year and have a three-year, average annual return of 70%. Analysts give its shares six "buy" ratings, three "buy/holds," eight "holds," and one "weak hold," according to a survey of analysts by S&P. It's expected to earn $7.03 this year and that earnings will grow 19% in 2013.

2. The Gap ( GPS)

Company profile: Gap owns Old Navy- and Banana Republic-branded stores in addition to its namesake store brand. The company operates more than 3,000 stores worldwide.

Investor takeaway: Its shares are up 37% this year and have a three-year, average annual return of 31%. Analysts give its shares four "buy" ratings, two "buy/holds," 25 "holds," three "weak hold," and two "sells," according to a survey of analysts by S&P. It's expected to earn $1.54 per share in 2012, and grow that by 18% in 2013.

1. Michael Kors ( KORS)

Company profile: Michael Kors, with a market value of $9 billion, operates internationally in three business segments: retail, wholesale and licensing. It owns retail stores and also distributes its branded apparel and accessories in department stores and specialty stores.

Investor takeaway: Its shares are up 79% this year, including 45% in the past month. It has only been public about a year. Analysts give its shares five "strong buy" ratings, and one "moderate buy," according to a survey of analysts by TheStreet Ratings. The stock got a big boost last month when the company reported a strong fiscal third quarter, with sales up 83% and earnings up 47%.

Investor takeaway: Its shares are up 28% this year and have a three-year, average annual return of 41%. Analysts give its shares one "buy" rating, two "holds," and one "weak hold," according to a survey of analysts by S&P.

>>To see these stocks in action, visit the 8 Stocks Rising Fast on Rich People's Spending portfolio on Stockpickr.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

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