Growth stocks can help to lift the value of your portfolio consistently higher over time.
The key is to ensure that you select the right stocks to include.
The consumer sector is a great place to start looking for investment ideas.
This industry, however, can experience volatile swings in line with the ups and downs of the economy.
Investors can look to the luxury goods industry, a sub-segment of the consumer sector, for businesses that enjoy more consistent demand.
The ultra-high-net-worth folk are less affected by downturns and will continue to buy goods from this sector no matter what the economic climate is like.
Here are three luxury goods stocks that you can consider adding to your buy watchlist.
Tapestry (NYSE: TPR)
Tapestry is a luxury goods retailer selling products such as handbags and apparel under three iconic brands – Coach, Kate Spade, and Stuart Weitzman.
The company has demonstrated steady growth over the past three years.
For fiscal 2021 (ending 1 July), sales came in at US$5.7 billion and by fiscal 2023 (FY2023), they had risen to US$6.7 billion.
Net profit climbed from US$834.2 million to US$936 million over the same period.
Tapestry also generated positive free cash flow in all three fiscal years.
For the first quarter of fiscal 2024 (1Q FY2024), Tapestry saw revenue inch up 0.4% year on year to US$1.5 billion.
The gross profit margin improved from 70% in 1Q FY2023 to 72.5% in 1Q FY2024, leading to a slight 4.1% year-on-year increase in gross profit to US$1.1 billion.
Net profit, however, remained flat year on year at US$195 million due to higher interest and marketing expenses.
There could be more growth in store for the luxury goods retailer.
Back in August, Tapestry acquired Capri Holdings, a fashion luxury group with brands such as Versace, Jimmy Choo, and Michael Kors, for US$8.5 billion.
This acquisition is expected to immediately add to Tapestry’s earnings per share.
The board also approved an increase in Tapestry’s dividend with a 17% year-on-year jump to US$1.40 per share.
Meanwhile, the company just opened a new full-scale fulfilment centre in North Las Vegas, Nevada, last week.
This new facility is expected to distribute 22.2 million units annually and store four million units of inventory for both retail and e-commerce as well as add more than 400 full-time jobs by 2029.
Tapestry has identified a total addressable market (TAM) of US$320 billion for the premium personal goods market, giving it ample opportunities to continue growing its revenue and profits.
Coty (NYSE: COTY)
Coty is one of the world’s largest beauty companies with a portfolio of brands across fragrances, cosmetics, skin, and body care.
Some of its famous brands include Vera Wang, Miu Miu, Marc Jacobs, Gucci, and Hugo Boss.
The company’s revenue rose from US$4.6 billion in fiscal 2021 (ending 30 June) to US$5.6 billion in FY2023.
Coty went from a net loss of US$201.3 million in FY2021 to a net profit of US$508.2 million in FY2023.
Despite this volatility, the business generated an average positive free cash flow of US$366.7 million over the three years.
Back in September, the company raised its outlook for FY2024 as management saw strong beauty demand, particularly in prestige fragrances.
For 1Q FY2024, Coty reported an 18.1% year-on-year jump in revenue to US$1.6 billion with operating profit improving by almost 15% year on year to US$197.5 million.
Adjusted net profit came in at US$86.8 million, more than double the US$36.3 million a year ago.
Management intends to increase share buybacks in FY2025 to further reduce share count by FY2026 to enhance earnings per share.
For FY2024, the company expects like-for-like sales to grow between 9% to 11%, fuelled by the outperformance of its Prestige segment.
Ferrari NV (NYSE: RACE)
Ferrari is one of the world’s leading luxury brands in the performance sports car space.
The Italian company symbolises exclusivity and innovation along with state-of-the-art sporting performance.
Ferrari has displayed steady growth over the years with revenue climbing from €3.5 billion in 2020 to €5.1 billion in 2022.
Net profit surged more than 53% over the same period to €932.6 million.
The luxury sports car manufacturer’s momentum has continued into 2023.
For the first nine months of 2023 (9M 2023), revenue climbed 19% year on year to €4.4 billion with net profit leaping 34% year on year to €963 million.
Ferrari’s shipments grew by 5% year on year to 10,418 units in 9M 2023.
The company’s order book stood at its highest level across all geographies and models and covers the whole of 2025.
Ferrari is releasing two new models – the 499P Modifica and 296 Challenge, that should help to further boost demand and sales for the business.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.