3 Luxury Stocks to Seize Sizable Opportunities

Analysts expect double-digit growth for luxury stocks this year. Here are three that could take a piece of that pie.

fancy purse, high heels and lipstick
(Image credit: Getty Images)

The market for luxury goods has been fueled by the mushrooming of high-priced fashion, leather goods and watches, just to name a few, that are sought out by the growing affluent in the U.S., Europe and China.

And while luxury stocks, like many other pockets of the retail sector, have seen some challenges due to COVID-19 headwinds, they've also shown resilience.

"In the context of a pandemic, [luxury goods] companies have demonstrated their strengths such as pricing power, high profitability, cash-rich balance sheets and the benefits of digital, all leading to record sales and profit levels," say a team of UBS Global Research analysts.

They identify three "themes" that will likely drive luxury stocks in 2022: Pricing power; margin gaps between outperforming and lagging names; and continued strength in the jewelry category, which lost market share during the pandemic. The team of analysts expect the luxury goods sector to see total forex-neutral revenue growth of 12% this year, even after reaching record sales in 2021.

BofA Securities equity strategists are also bullish on luxury stocks. "2022 will be the year the sector reinforces its (already strong) market position by reinvesting significant operating leverage into brand equity building initiatives supporting future revenue growth, creating a bigger moat, all while expanding margins," they write. The group sees 20% earnings growth this year, which is 10% ahead of the consensus.

Helping things along for luxury stocks will be consumers loosening their purse strings. According to Oxford Economics, Americans saved roughly $3.7 trillion during the pandemic. And the global forecasting firm expects them to spend $360 billion through the end of 2022, with more than 69% of that spending occurring at the hands of the wealthiest 20% of households.

With this in mind, here are three luxury stocks that could be poised to profit off this expected growth. Each of the stocks featured here trade over the counter in the U.S. through American depositary receipts (ADRs).

Data is as of Feb. 8. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price.

Riccardo A. Davis
Contributing Writer, Kiplinger.com

Riccardo is an award-winning business journalist who has covered Fortune 500 companies for news organizations across the United States.