Tiffany & Co. (TIF), Burberry Group plc (BRBY), LVMH Moet Hennessy Louis Vuitton SA(ADR) (LVMUY): Forecasting the Luxury Goods Industry

The luxury goods sector is growing fast, hand-in-hand with the growth of wealth in the developing world. Countries such as Russia,China and Brazil are creating thousands of new rich families every year. One of the many direct results of this trend — which could last many decades — has been the tremendous growth of high-end-luxury companies. Here I will try to forecast next quarter’s results for my top three luxury goods companies.

British chic-style

For the coming quarter, I expect organic growth to come as high as 5% year-over-year and retail same-store-sales to come up by 6%. The reason to expect overall growth coming at just 5% is that I expect a decline in wholesale. Regardless, the company remains extremely healthy.

Most importantly, there is huge room for margin improvement. While a company like Gucci has operating margins of 31%, Burberry has operating margins of 17%. The reason is that Burberry Group plc (LON:BRBY)’s operating expenses have remained high due to the upcoming changes regarding its beauty division and its business in Japan.

Trading at 2013 20 times P/E and paying a 2.95% cash dividend yield, I love this British chic-style company.

The world-wide king of luxury

I expect this luxury giant to show good first half 2013 results. I would expect 8% year-over-year organic growth (4% year-over-year for fashion and leather) and a broadly stable 21% operating margin.