NEW YORK (TheStreet) -- Which luxury goods companies should investors be buying given the current market volatility and currency fears?

Italian luxury handbag and accessories maker Prada (PRDSY) said on Monday that it plans to open fewer stores in fiscal 2015 amid revenue and profit decline in its most recent fiscal year (fueled by poor performance in Hong Kong and Macau). Other U.S.-based companies like Michael Kors (KORS) have seen shares beaten down since last summer over concerns of slowing growth (albeit still in the double digits), despite international expansion.

For 2015, "preferences for experiences over products will eat into category growth, as will the geopolitical uncertainties around the world," wrote retail expert Marie Driscoll in a blog post last month.

"The retrenchment in China will continue to impact sales of all types of luxury goods, from autos and watches to handbags and footwear in 2015," Driscoll added. "The 'sugar high' of double digit demand growth emanating from China and other emerging markets will not support robust industry growth in 2015. In China, ostentation is frowned upon, and this trend is likely to be with us in 2015, if not longer. Another year of 2%-3% growth demands luxury brands return to their ateliers and nurture creativity on the product, marketing, social media, and retailing fronts. Slow growth in a fast paced world can quickly lead to irrelevancy."

The S&P 500 Global Luxury Index is up 1.64% this year, just barely outperforming the broader S&P 500 index, which is up 1.33%.

So which stocks are best to bet on? TheStreet Ratings recommends eight buy-rated U.S.-based luxury companies.

TheStreet Ratings, TheStreet's proprietary ratings tool, projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating over 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength, and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.

Check out which eight luxury consumer goods companies made the list. And when you're done be sure to read about which utilities stocks with high dividends you should buy now. Year-to-date returns are based on March 27, 2015 closing prices.

 

1. PVH Corp. (PVH - Get Report)
Rating: Buy, B-
Market Cap: $8.7 billion
Year-to-date return: -19%

PVH Corp. operates as an apparel company in the United States and internationally. It is engaged in the design, marketing, and retail of branded dress shirts, neckwear, sportswear, swim products, footwear, athletic apparel, body wear, eyewear, sunwear, watches, handbags, men's tailored clothing, men's dress furnishings, accessories, women's dresses and suits, women's performance apparel, golf apparel, hosiery, socks, small leather goods, fragrances, home and bedding products, bathroom accessories, and luggage.

The company offers its products under its own brands, such as Calvin Klein, Tommy Hilfiger, Van Heusen, IZOD, ARROW, Warner's, Olga, and Eagle; licensed brands comprising Speedo, Geoffrey Beene, Kenneth Cole New York, Kenneth Cole Reaction, Sean John, MICHAEL Michael Kors, Michael Kors Collection, Chaps, Donald J. Trump Signature Collection, DKNY, Elie Tahari, Nautica, Ted Baker, J. Garcia, Claiborne, Robert Graham, U.S. POLO ASSN., Ike Behar, Axcess, Jones New York, and John Varvatos; and trademarks, as well as various other licensed and private label brands.

"We rate PVH CORP (PVH) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, revenue growth, reasonable valuation levels and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • PVH CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, PVH CORP increased its bottom line by earning $5.27 versus $1.71 in the prior year. This year, the market expects an improvement in earnings ($7.20 versus $5.27).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Textiles, Apparel & Luxury Goods industry. The net income increased by 237.5% when compared to the same quarter one year prior, rising from -$37.46 million to $51.50 million.
  • PVH's revenue growth trails the industry average of 13.8%. Since the same quarter one year prior, revenues slightly increased by 0.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The gross profit margin for PVH CORP is rather high; currently it is at 54.97%. Regardless of PVH's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 2.48% trails the industry average.

 

 


2. Ethan Allen Interiors (ETH - Get Report)
Rating: Buy, B
Market Cap: $802 million
Year-to-date return: -12.3%

Ethan Allen Interiors Inc. operates as an interior design company and manufacturer and retailer of home furnishings in North America, Europe, Asia, and the Middle East. The company operates in two segments, Wholesale and Retail.

"We rate ETHAN ALLEN INTERIORS INC (ETH) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • ETH's revenue growth has slightly outpaced the industry average of 0.3%. Since the same quarter one year prior, revenues slightly increased by 2.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has significantly increased by 149.96% to $3.65 million when compared to the same quarter last year. In addition, ETHAN ALLEN INTERIORS INC has also vastly surpassed the industry average cash flow growth rate of 38.71%.
  • The current debt-to-equity ratio, 0.35, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.76 is somewhat weak and could be cause for future problems.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.

 

 

 

3. Luxottica Group SpA (LUX)
Rating: Buy, B
Market Cap: $30.4 billion
Year-to-date return: 16.6%

Luxottica Group S.p.A., together with its subsidiaries, provides luxury and sports eyewear worldwide. The company operates in two segments, Manufacturing and Wholesale Distribution, and Retail Distribution.

"We rate LUXOTTICA GROUP SPA (LUX) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in net income and increase in stock price during the past year. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • LUXOTTICA GROUP SPA reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, LUXOTTICA GROUP SPA increased its bottom line by earning $1.62 versus $1.58 in the prior year. This year, the market expects an improvement in earnings ($1.99 versus $1.62).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Textiles, Apparel & Luxury Goods industry. The net income increased by 58.6% when compared to the same quarter one year prior, rising from $48.40 million to $76.78 million.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • The revenue fell significantly faster than the industry average of 13.8%. Since the same quarter one year prior, revenues fell by 18.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.

 

4.Michael Kors (KORS)
Rating: Buy, B
Market Cap: $13.3 billion
Year-to-date return: -10.8%

Michael Kors Holdings Limited is engaged in the design, marketing, distribution, and retailing of branded women's apparel and accessories, and men's apparel. The company operates in three segments: Retail, Wholesale, and Licensing.

"We rate MICHAEL KORS HOLDINGS LTD (KORS) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, impressive record of earnings per share growth and compelling growth in net income. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 13.8%. Since the same quarter one year prior, revenues rose by 29.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • KORS has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 3.64, which clearly demonstrates the ability to cover short-term cash needs.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Textiles, Apparel & Luxury Goods industry and the overall market, MICHAEL KORS HOLDINGS LTD's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • MICHAEL KORS HOLDINGS LTD has improved earnings per share by 33.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, MICHAEL KORS HOLDINGS LTD increased its bottom line by earning $3.21 versus $1.97 in the prior year. This year, the market expects an improvement in earnings ($4.30 versus $3.21).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Textiles, Apparel & Luxury Goods industry average. The net income increased by 32.2% when compared to the same quarter one year prior, rising from $229.64 million to $303.68 million.

 

 

 


5. Tiffany (TIF - Get Report)
Rating: Buy, B
Market Cap: $11.5 billion
Year-to-date return: -19%

Tiffany & Co., through its subsidiaries, designs, manufactures, and retails jewelry worldwide. Its jewelry products include fine and solitaire jewelry; engagement rings and wedding bands to brides and grooms; and non-gemstone, sterling silver, gold, and metal jewelry.

"We rate TIFFANY & CO (TIF) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and good cash flow from operations. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • TIFFANY & CO reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, TIFFANY & CO increased its bottom line by earning $3.73 versus $1.40 in the prior year. This year, the market expects an improvement in earnings ($4.20 versus $3.73).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Specialty Retail industry. The net income increased by 289.4% when compared to the same quarter one year prior, rising from -$103.60 million to $196.18 million.
  • The current debt-to-equity ratio, 0.39, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.44, which illustrates the ability to avoid short-term cash problems.
  • The gross profit margin for TIFFANY & CO is rather high; currently it is at 64.66%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 15.26% is above that of the industry average.
  • Net operating cash flow has significantly increased by 966.35% to $437.34 million when compared to the same quarter last year. In addition, TIFFANY & CO has also vastly surpassed the industry average cash flow growth rate of 22.32%.

 

 

6. VF Corp. (VFC)
Rating: Buy, B
Market Cap: $32.2 billion
Year-to-date return: -0.7%

V.F. Corporation designs, manufactures, markets, and distributes branded lifestyle apparel, footwear, and accessories in the United States and Europe. The company offers outdoor apparel, footwear and equipment, youth culture/action sports-inspired footwear, handbags, luggage, backpacks, totes, accessories, merino wool socks, women's activewear, and travel accessories under the The North Face, Vans, Timberland, Kipling, Napapijri, Jansport, Reef, Smartwool, Eastpak, lucy, and Eagle Creek brands. It also provides denim, casual apparel, footwear, and accessories under the Wrangler, Lee, Lee Casuals, Riders by Lee, Rustler, Timber Creek by Wrangler, and Rock & Republic brands. In addition, the company offers occupational, protective occupational, athletic, licensed athletic, and licensed apparel products under the Red Kap, Bulwark, Horace Small, Majestic, MLB, NFL, and Harley-Davidson brands; sportswear apparel, luggage, and accessories under the Nautica brand; and handbags, luggage, backpacks, totes, and accessories under the Kipling brand.

"We rate VF CORP (VFC) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 13.8%. Since the same quarter one year prior, revenues slightly increased by 8.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Although VFC's debt-to-equity ratio of 0.26 is very low, it is currently higher than that of the industry average. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.39, which illustrates the ability to avoid short-term cash problems.
  • Net operating cash flow has increased to $1,330.78 million or 22.31% when compared to the same quarter last year. In addition, VF CORP has also vastly surpassed the industry average cash flow growth rate of -44.53%.
  • The gross profit margin for VF CORP is rather high; currently it is at 50.57%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 3.41% trails the industry average.
  • VF CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, VF CORP reported lower earnings of $2.39 versus $2.71 in the prior year. This year, the market expects an improvement in earnings ($3.20 versus $2.39).

 

 

 


7. Nordstrom (JWN - Get Report)
Rating: Buy, A+
Market Cap: $15.3 billion
Year-to-date return: 0.4%

Nordstrom, Inc., a fashion specialty retailer, offers apparel, shoes, cosmetics, and accessories for men, women, and children in the United States and Canada. It operates through two segments, Retail and Credit.

"We rate NORDSTROM INC (JWN) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, expanding profit margins, good cash flow from operations and notable return on equity. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • JWN's revenue growth has slightly outpaced the industry average of 2.3%. Since the same quarter one year prior, revenues slightly increased by 8.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, JWN's share price has jumped by 27.72%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, JWN should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • NORDSTROM INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. We anticipate these figures will begin to experience more growth in the coming year. During the past fiscal year, NORDSTROM INC's EPS of $3.72 remained unchanged from the prior years' EPS of $3.72. This year, the market expects an improvement in earnings ($3.78 versus $3.72).
  • 41.58% is the gross profit margin for NORDSTROM INC which we consider to be strong. Regardless of JWN's high profit margin, it has managed to decrease from the same period last year.
  • Net operating cash flow has increased to $704.00 million or 16.94% when compared to the same quarter last year. Despite an increase in cash flow, NORDSTROM INC's average is still marginally south of the industry average growth rate of 24.58%.

 


8. Williams-Sonoma (WSM - Get Report)
Rating: Buy, A+
Market Cap: $7.3 billion
Year-to-date return: 2.9%

Williams-Sonoma Inc. operates as a multi-channel specialty retailer of home products. The company operates in two segments, Direct-to-Customer and Retail.

TheStreet Ratings team rates WILLIAMS-SONOMA INC as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:

"We rate WILLIAMS-SONOMA INC (WSM) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, solid stock price performance, largely solid financial position with reasonable debt levels by most measures and notable return on equity. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 13.1%. Since the same quarter one year prior, revenues slightly increased by 5.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • WILLIAMS-SONOMA INC has improved earnings per share by 13.8% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, WILLIAMS-SONOMA INC increased its bottom line by earning $3.26 versus $2.85 in the prior year. This year, the market expects an improvement in earnings ($3.46 versus $3.26).
  • The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • WSM's debt-to-equity ratio is very low at 0.00 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.33 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to other companies in the Specialty Retail industry and the overall market on the basis of return on equity, WILLIAMS-SONOMA INC has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.