Luxury Stocks in Focus as Spending Booms (NYSE: SIG) (OTC US: SKDI) (NYSE: TPR)
March 24, 2021 at 08:08 AM EDT
Massive stimulus checks, extreme Fed easing, a strengthening inflationary outlook, rising employment, faster-than-expected vaccine rollout, and the movement out of the cold and flu season in the northern hemisphere are all contributing to rising economic expectations. With those expectations on the rise, the fact of a 20% savings rate is even more remarkable.
The amount of buying power that this represents is hard to conceptualize. And, so far, it is adding up to a big boost in demand for high-end luxury goods like jewelry and fancy watches.
For investors, that represents a key area of focus.
With that in mind, we take a look at a few interesting luxury goods stocks with momentum and active catalysts, including: Signet Jewelers Ltd (NYSE:SIG), Sun Kissed Industries Inc (OTCMKTS:SKDI), and Tapestry Inc (NYSE:TPR).
Signet Jewelers Ltd (NYSE:SIG) bills itself as the world’s largest retailer of diamond jewelry, and it represents the parent company to most of the world’s top jewelers.
The company operates approximately 2,900 stores primarily under the name brands of Kay Jewelers, Zales, Jared, H.Samuel, Ernest Jones, Peoples, Piercing Pagoda, and JamesAllen.com as well as digital marketplaces under multiple websites.
Signet Jewelers Ltd (NYSE:SIG) recently lit the luxury goods market on fire with its announcement of better-then-expected earnings data, which included CEO commentary that added fuel to the fire. “This quarter marked an important milestone for Signet as our team delivered a strong fourth quarter and third year of the Company’s Path to Brilliance transformation. These results reflect the exceptionally hard work and resilience of our Signet team members in a uniquely challenging time. I’m so appreciative of their passion, commitment to our purpose, and agility in meeting the needs of our customers with new digital capabilities. They are the driving force behind our success and are positioning us for long-term growth,” said Virginia C. Drosos, Chief Executive Officer.
Drosos continued, “Our company today is stronger: we’re more innovative, efficient, and digitally advanced. We are capitalizing on our momentum as we move into the next phase of our growth strategy called ‘Inspiring Brilliance.’ It is focused on winning in our big banners, categories, and countries; accelerating Services revenue; broadening our mid-market with expansion in the Accessible Luxury and Value segments; and accelerating Digital Commerce, all with an emphasis on leading innovation in the jewelry industry and growing the scope of Signet’s market. The cornerstone of this strategy will remain centered on our purpose of Inspiring Love and being a catalyst for positive change in our company, industry and community.”
While this is a clear factor, it has been incorporated into a trading tape characterized by a pretty dominant offer, which hasn’t been the type of action SIG shareholders really want to see. In total, over the past five days, shares of the stock have dropped by roughly -10% on above average trading volume. All in all, not a particularly friendly tape, but one that may ultimately present some new opportunities.
Signet Jewelers Ltd. (NYSE:SIG) generated sales of $2.2B, according to information released in the company’s most recent quarterly financial report. That adds up to a sequential quarter-over-quarter growth rate of 68.2% on the top line. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($1.2B against $2B, respectively).
Sun Kissed Industries Inc (OTCMKTS:SKDI), now doing business as SFLMaven with an apparently pending formal name change, is a high-end online jewelry retailer that brought in sales of nearly $11 million in 2019 and over $130 million since 2004 on a proven track record featuring strong revenues over seventeen years.
That track record looks to have held up in 2020, despite the challenging context for high-end retailers, and also set to ramp up in 2021, based on the company’s recent communications.
SLFMaven (OTCMKTS:SKDI) has recently begun to put out regular updates on its successful “Famous Thursday Night Auction” events. The company most recently announced yet another strong week of sales concluding with another excellent Thursday Night event.
According to company materials, for the week ended Thursday, March 11, the Company booked a total of $189k in gross sales, including roughly $170k from its Thursday Night Auction event. Thursday’s auction was highlighted by the sale of a Heavy Platinum/18k gold 11.13ctw vs/f natural fancy yellow diamond link bracelet, which sold for $6,500.
“Sales this year are moving at a pace that represents enormous growth somewhere in the vicinity of +25-50% above our 2020 fiscal year numbers,” noted Joseph Ladin, CEO of SFLMaven. “Thursday night’s auction event was another tremendous success with strong traffic and participation, facilitating the sale of a large number of top pieces at advantageous price points. We have a great line-up in place for this week’s auction and we look forward to continuing our strong momentum on Thursday.”
Sun Kissed Industries Inc (OTCMKTS:SKDI) just basically outperformed any reasonable set of 2020 expectations given its small size and its sector positioning and the deep recession we saw last year. We don’t have final numbers yet, but we can probably assume that $7.5 million in sales is pretty much where things will land for the year. The stock is now riding a strong upward trend, up as much as 350% since its transition into SFLMaven last year in November.
Tapestry Inc (NYSE:TPR) operates through three segments: Coach, Kate Spade, and Stuart Weitzman. All of these segments sit at the heart of the luxury goods space.
It offers women’s accessories, including handbags, such as wallets, money pieces, wristlets, and cosmetic cases; novelty accessories comprising address books, time management accessories, travel accessories, sketchbooks, and portfolios; key rings; and charms.
Tapestry Inc (NYSE:TPR) recently announced its participation in the Black in Fashion Council Active Allyship Pledge. Members of the Active Allyship program commit to joining together to secure the advancement of Black individuals in the fashion and beauty industry.
“We are proud to partner with the Black in Fashion Council and join them in their mission to ensure that Black individuals are represented and amplified in our industry,” said Joanne Crevoiserat, Chief Executive Officer of Tapestry, Inc. “We have committed to expanding diversity in our Tapestry and brand leadership teams. Working with the Council will help us to build upon the progress that we have made in achieving these goals.”
While this is a clear factor, it has been incorporated into a trading tape characterized by a pretty dominant offer, which hasn’t been the type of action TPR shareholders really want to see. In total, over the past five days, shares of the stock have dropped by roughly -8% on above average trading volume. All in all, not a particularly friendly tape, but one that may ultimately present some new opportunities. TPR shares have been relatively flat over the past month of action, with very little net movement during that period.
Tapestry Inc (NYSE:TPR) managed to rope in revenues totaling $1.7B in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of -7.2%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels far exceeding current liabilities ($1.7B against $1.5B).
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