With a growing economy (the IMF expects the US economy to grow by 3% in 2014) and unemployment heading south, the consumer discretionary space should outperform the market going forward. Here I will make a short recap of my top three consumer discretionary ideas. This three companies are growing their top-lines with a strong focus on margin expansion. My bet is that they should be returning money to shareholders at an increasing level. Let’s take a look!
Ready to distribute more cash
Luxury trading at fair prices
Coach, Inc. (NYSE:COH) is one of the very few luxury goods companies that (1) Is growing its top-line fast in emerging countries and (2) Is selling for good price. It’s currently trading at 2013 8.7 times EV/EBITDA, 15.2 times P/E, and paying a 2.35% cash dividend yield.
Besides, Coach, Inc. (NYSE:COH) showed that efforts to stabilize its North America business, where sales surged by 7% YOY, are being successful. North America store comps (the most important performance figure in retail) were up 1%, and wholesale declines moderated. Better yet, margin performance was solid, and international markets continued to perform beautifully. In China, a key market, sales were up by 40% and store comps were up by mid-double digits. Good signs didn’t end there, the company trusts its brand and announced the acquisition of its European Joint Venture, which operates 18 stores.