Solid Earnings Growth Predicted for Luxury Retailers

January 22, 2004

Solid Earnings Growth Predicted for Luxury Retailers

Thomson First Call estimates its luxury retail sector will enjoy 23% year-over-year earnings growth, says research analyst Ken Perkins. That segment includes jewelers Tiffany & Co., Zale Corp. and Friedman's. Thomson also predicts earnings growth for upscale department stores Nordstrom Inc. and the Neiman Marcus Group Inc. will jump 45% and 25%.

Of particular interest to analysts is the upsurge in ultra-luxury purchases, exemplified by news such as Tiffany's announcement that jewelry priced $50,000 and up represented the largest percentage growth category in its U.S. holiday same-store sales figures. "High-end consumers are feeling better about themselves," says Lehman Bros. analyst Alan Rifkin. Rifken told Reuters "tickets above $50,000 were extremely strong."

Among other luxury products selling with eye-popping prices are cars. German automaker Porsche AG, received "several hundred orders" for this year's $440,000 Carrera GT, according to the company spokesperson Jody Scott. Orders for the car, which can go as fast as 205 miles per hour, are backlogged to 2005. Neiman Marcus also noted that when it released its Christmas Book gift catalog, all 50 BMWs listed – at $75,000 each – sold out in under seven minutes.

"Clearly, the high-end consumer is back," says analyst Kristine Koerber of WR Hambrecht. She credits tax cuts, an improved stock market and higher corporate bonuses with bringing fat wallets back to upscale stores. But Porsche spokesman Martin Peters thinks consumers attitudes are really what have changed. "We had customers come in and say 'we're only here once. Let's enjoy it.'"

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