Handbag maker Coach, Inc. (NYSE:COH) provided a compelling outlook back on April 23, offering guidance of high sales growth, a strong China story, and a dividend raise of 13%. Coach, Inc. (NYSE:COH)’s market capitalization of $16.5 billion is significantly larger than Vera Bradley’s market cap of less than $1 billion.
The company is expanding beyond luxury handbags into footwear, watches, and clothes. In March, Coach, Inc. (NYSE:COH) introduced footwear in 170 of its 543 North American stores and 60 stores internationally. Readers should consider Coach, Inc. (NYSE:COH) in its own right; the stock offers a compelling growth opportunity at lower risk than Vera Bradley.
Internationally acclaimed Tiffany & Co. (NYSE:TIF) reported first quarter 2013 results on May 28, with a 9% increase in worldwide net sales. I highlighted the iconic jeweler and maker of the Blue Box going into earnings, stating that results could be boosted by falling gold and silver prices.
The Tiffany & Co. (NYSE:TIF) report was extremely positive; sales increased in every portion of the globe, including Americas, Asia-Pacific, Japan, Europe, and United Arab Emirates. Following the quarter, Tiffany announced the opening of a Moscow, Russia location in the first quarter of 2014. While shares trade at a premium 25x earnings, if a buy-and-hold forever stock exists, Tiffany fits the bill.
Foolish takeaway
Luxury goods makers have gathered momentum in 2013, and further gains are likely for long-term investors.
In the case of Vera Bradley, shares are on sale at a time when the brand’s consumer appeal remains strong. I encourage readers to buy Vera Bradley on current weakness, as the stock has limited downside based on management’s revised guidance. Many opportunities exist for the company to right its path going forward, while the number of recent hiccups makes further travails unlikely.
Additional gains are likely in shares of Coach and Tiffany as both companies grow their footprint internationally. Coach is expanding its market presence into footwear and watches; the men’s business should grow 50% this year. Tiffany’s sales grew 15% year-over-year in Asia-Pacific. I’m confident the Blue Box will gain more steam with the opening of 24 new stores worldwide.
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John Macris has no position in any stocks mentioned. The Motley Fool recommends Coach. The Motley Fool owns shares of Coach.
The article Is This Luxury Brand the Next Turnaround Candidate? originally appeared on Fool.com and is written by John Macris.
John is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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