Increasing affluence and increased demand for luxury fashion products are major drivers of growth in the luxury retail sector. This trend benefits the industry by expanding the base of high-spending customers who are always looking for premium products, contributing to market expansion and brand profitability.
Against this backdrop, investors can profit by acquiring shares in fundamentally strong luxury retail stocks such as Dillard’s (DDS), Tapestry (TPR), and Signet Jewelers Limited (SIG). It is possible to obtain These companies are in a strategic position to benefit from the growing purchasing power of the wealthy, which is driving demand for premium, high-end products.
Several factors are driving the luxury goods market, including a growing affluent consumer base, increased desire for exclusivity, and the importance of brand value. According to Bain, the top 2% of luxury consumers account for 40% of luxury sales, highlighting the importance of this customer segment to the industry.
Rising wealth inequality is also contributing to the industry’s growth. Over the past 60 years, wealth has shifted dramatically from the middle class to the wealthiest families, worsening inequality, especially in the United States. A recent study from Duke University highlights how deep racial and economic histories have widened the racial wealth gap.
Luxury stocks are poised for growth as wealth inequality widens. As the wealthy population expands, the desire for luxury goods is increasing, and sales and profits are increasing. This makes luxury brands an attractive investment option for those seeking sustainable financial returns.
According to Fortune Business Insights, the global luxury goods market is expected to grow to $392.4 billion by 2030 at a CAGR of 4.7%. This growth reflects the growing influence of technology and the growing wealth of luxury consumers.
With these encouraging trends in mind, let’s take a look at the fundamentals of three Fashion & Luxury stocks, starting with No. 3.
Stock #3: Dillard’s Company (DDS)
DDS is a fashion retailer and general construction company with over 273 stores. The company operates more than 28 clearance centers and an online store, dillards.com. We also operate CDI Contractors, LLC, which performs store construction and renovations.
DDS’s trailing twelve month gross margin was 41.20%, which was 9.9% higher than the industry average of 37.48%. The company’s trailing 12-month leveraged FCF margin was 5.19%, which is 3.9% higher than the industry average of 5%. Furthermore, the stock’s ROCE and ROTA are 36.10% and 20.89%, which are 218.3% and 238.6% higher than the sector average of 11.34% and 6.17%, respectively.
For the second quarter of fiscal 2024, which ended August 3, DDS reported net sales of $1.49 billion. Net income was $74.5 million and EPS was $4.59. Additionally, the company had cash and cash equivalents of $946.7 million as of August 3, 2024, compared to $774.3 million as of July 29, 2023.
Analysts expect DDS’ revenue to increase slightly from a year ago to $6.51 billion for the year ending January 2026. Additionally, EPS is expected to post $29.93 during the period. Additionally, the company beat consensus EPS estimates in three of the trailing four quarters.
DDS stock has soared 7.7% over the past month and 24.2% over the past year, closing at $376.53.
DDS’s positive outlook is reflected in its POWR rating. The stock has an overall rating of B, which equates to a Buy according to our proprietary rating system. POWR ratings are calculated by considering 118 different factors, each weighted to the best degree.
DDS has an A grade for quality and a B grade for momentum and value. The company ranks #18 out of 59 stocks in the A-rated Fashion & Luxury industry.
In addition to the above, we also evaluated DDS in terms of growth, stability, and sentiment. Get all DDS ratings here.
Stock #2: Tapestry Co., Ltd. (TPR)
TPR is a global leader with iconic accessories and lifestyle brands such as Coach, Kate Spade New York and Stuart Weitzman, offering women’s handbags, women’s accessories, men’s products and more.
TPR’s trailing twelve month EBITDA margin was 21.44%, which was 88.5% higher than the industry average of 11.37%. Furthermore, the company’s gross profit margin for the trailing 12 months was 73.29%, which is 95.5% higher than the sector average of 37.48%. Similarly, its trailing twelve month net profit margin of 12.23% was 163.6% higher than the industry average of 4.64%.
TPR’s net sales for the fourth quarter of fiscal 2024 ended June 29 were $1.59 billion. Gross profit increased 1.6% year-on-year to $1.19 billion. Additionally, net income was $159.3 million, or $0.68 per share. Total assets as of June 29, 2024 were $13.4 billion, and as of July 1, 2023, they were $7.12 billion.
Street expects TPR’s revenue to increase slightly from a year ago to $6.7 billion for the fiscal year ending June 2025. EPS for the current quarter is expected to be $4.48, up 4.5% year-over-year. Additionally, the company beat consensus EPS estimates in each of the trailing four quarters.
TPR stock has soared 10.7% in the past six months and 63.8% in the past year, closing at $45.20.
TPR’s POWR rating reflects TPR’s optimistic outlook. The overall rating is B, which equates to a “buy” in our own rating system.
TPR sentiment and quality are B grade. Ranked 17th out of 59 stocks in the Fashion & Luxury industry.
In addition to the above, we also give TPR grades for growth, value, momentum, and stability. Get all TPR ratings here.
Stock #1: Signet Jewelers Limited (SIG)
SIG, based in Hamilton, Bermuda, is a diamond jewelry retailer with segments that include North America. International; Other. The company operates approximately 2,700 stores under brands such as Kay Jewelers, Zales, Jared, Banter by Piercing Pagoda, Diamonds Direct, Blue Nile, JamesAllen.com and Rocksbox.
SIG’s trailing 12-month leveraged FCF margin of 6.25% is 25.2% higher than the industry average of 5%. The company’s trailing-twelve-month EBIT margin was 7.94%, slightly higher than the industry average of 7.89%. Similarly, the company’s trailing twelve month gross margin of 39.49% was 5.4% higher than the industry average of 37.48%.
For the second quarter of fiscal 2025, which ended August 3, SIG reported revenue of $1.49 billion. Adjusted operating income was $68.6 million. The company’s adjusted EPS was also $1.25. As of August 3, 2024, the company’s total current assets were $2.58 billion.
The consensus revenue estimate of $6.93 billion for the fiscal year ending January 2026 reflects a 2% year-over-year increase. Next year’s EPS is estimated to be $11.26, an increase of 6.9% from the previous year. Additionally, the company beat consensus EPS estimates in each of the trailing four quarters, which is noteworthy.
SIG stock has increased 14.8% over the past three months and 43.7% over the past year, closing at $99.53.
SIG’s solid fundamentals are reflected in its POWR rating. The stock has an overall rating of B, which equates to a Buy according to our proprietary rating system.
SIG has a B rating for Value, Growth, and Quality. It ranks 16th out of 59 stocks in its industry.
Click here to see additional POWR Ratings for SIG Momentum, Stability, and Sentiment.
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TPR stock was unchanged in premarket trading Wednesday. Year-to-date, TPR has increased by 25.78%. In comparison, the benchmark S&P 500 index rose 23.13% during the same period.
About the author: Aanchal Sugandh
Aanchal’s passion for financial markets drives his work as an investment analyst and journalist. She has a bachelor’s degree in finance and is pursuing a CFA program. She is adept at using fundamental analysis skills to assess the long-term prospects of stocks. Her goal is to help investors build portfolios that deliver sustainable returns. more…
