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3 International Luxury Goods Stocks to Spruce Up Your Portfolio

The global luxury goods market’s recovery is being powered by the rapid rollout of COVID-19 vaccines, renewed consumer confidence, and increasing affluence in countries worldwide. Consequently, international luxury goods companies Hermès International Société (HESAY), Burberry Group (BURBY), and Hugo Boss (BOSSY), which are progressively strengthening their e-commerce platforms, should witness significant demand in the coming months. So, we think it could be wise to add these names to one's portfolio now.

With rapid digital advancements, evolving marketing strategies, the rising popularity of premium brands in e-commerce platforms, and consumers' increasing purchasing power, the COVID-19 pandemic has catalyzed the luxury goods industry’s ability to transform.

The global Luxury goods market is expected to reach $296.9 billion by 2026, registering a 4.8% CAGR. A rapid rollout of COVID-19 vaccines worldwide and substantial fiscal stimulus, along with renewed consumer confidence, should accelerate domestic spending on luxury goods. Furthermore, increasing spending on premium luxury brands by high-net-worth individuals, fostered by the growing influence of social media platforms, should spur the industry's growth.

Given current industry dynamics, we think international luxury goods stocks Hermès International Société en commandite par actions (HESAY), Burberry Group plc (BURBY), and Hugo Boss AG (BOSSY) are well-positioned to benefit. So, these stocks could be wise bets now.

Hermès International Société en commandite par actions (HESAY)

Based in Paris, France, HESAY produces, wholesales, and retails various leather goods, textiles, wallpapers, and other accessories. The company also offers a range of equestrian products and clothing, ready-to-wear garments, and shoes. In addition, HESAY produces silk, the art of living products, furnishing fabrics, and watches. It sells its products through a network of 306 stores, including 221 directly operated stores worldwide.

In July, HESAY reopened its Milan flagship store, with two additional floors to host the full range of its leather goods collection, ready-to-wear women’s collection, and a wide array of furniture and tableware collections. This enhanced space and unique collection should boost HESAY’s brand value and help it grow its sales.

HESAY’s revenue increased 77% year-over-year at constant exchange rates to €4.24 billion ($4.98 billion) for the half-year ended June 30, 2021. Its recurring operating income came in at €1.72 billion ($2.02 billion), representing a 221.9% increase from its  year-ago value. The company’s net income amounted to €1.17 billion ($1.38 billion), up 250.4% year-over-year. Furthermore,  its net cash position increased 42.3% from its  year-ago value to €5.33 billion ($6.27 billion) over this period.

A $10.05 billion consensus revenue estimate for the fiscal period ending December 2021 indicates 29.8% growth year-over-year. Also, the stock has gained 7.8% in price over the past three months and 30.6% over the past six months.

HESAY’s POWR Ratings reflect this promising outlook. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

HESAY is rated an A in Momentum, and a B in Growth and Quality. Within the A-rated Fashion & Luxury industry, it is ranked #46 of 64 stocks.

To see additional POWR Ratings for Value, Sentiment, and Stability for HESAY, click here.

Burberry Group plc (BURBY)

London-based luxury goods brand, BURBY, operates in two segments, Retail/Wholesale and Licensing. It offers apparel and accessories and licenses third parties to manufacture and distribute products using the Burberry trademark. BURBY markets its products through Burberry mainline stores, concessions, outlets, digital commerce, Burberry franchisees, department stores, and multi-brand specialty accounts. The company operated 214 mainline stores, 145 concession stores, 56 outlets, and 44 franchise stores as of March 27, 2021.

This month, BURBY formed  a partnership with Mythical Games to launch a non-fungible token (NFT) collection in its  flagship title, Blankos Block Party, which is expected to pave the way for the future of digital ownership in gaming. The collaboration reflects BURBY’s longstanding spirit of innovation and uniqueness in inviting  its customers to connect with the brand. 

In July, BURBY opened a new flagship store in London, which features BURBY’s new global design concept that captures the essence of the luxury house. The store’s unique British setting and premium brand collection should help the company host both local and international customers.

In the fiscal year ended March 27, 2021, BURBY’s operating profit rose 176.2% year-over-year to £521.1 million ($721.11 million). The company’s attributable profit increased 209.1% from the prior-year quarter to £375.9 million ($520.18 million), while its adjusted operating margin rose 50 basis points year-over-year to 16.9%. Its net cash from operating activities increased 29.8% from its  year-ago value to £455.8 million ($630.74 million) for the quarter.

Analysts expect BURBY’s revenue to increase 15.2% year-over-year to $3.79 billion in its  fiscal period ending March 2022. BURBY’s stock price has surged 10.1% in price over the past nine months and 3% year-to-date.

It is no surprise that BURBY has an overall B rating, which translates to a Buy in our POWR Ratings system. In addition, BURBY has an A grade for Momentum, and a B for Quality. In the Fashion & Luxury industry, it is ranked #28.

In total, we rate BURBY on eight different levels. Beyond what we’ve stated above, we have also given BURBY grades for Growth, Value, Stability, and Sentiment. Get all the BURBY ratings here.

Hugo Boss AG (BOSSY)

BOSSY, a Germany-based company, develops and distributes shoes, clothes, and accessories worldwide. The company sells business, casual and evening wear, shoes and accessories, and other licensed products under the BOSS and HUGO brand names. It distributes its products through online stores, freestanding stores, shop-in-shops, and factory outlets.

This month, BOSSY introduced a new growth strategy, “CLAIM 5”, to double the sales to €4 billion ($4.70 billion) by 2025. With this new strategy, the company expects to become one of the top-100 global brands.

In April, BOSSY expanded its online store As a result, its products have been made available to  customers in 12 additional markets, including South Korea, Russia, and United Arab Emirates. This significant expansion should allow BOSSY to reach its goal of increasing its online sales to more than €400 million ($470.02 million) by 2022.

During the second quarter, ended June 30, 2021, BOSSY’s sales increased 128.7% from the prior-year quarter to €629 million ($740.17). Its gross profit came in at €385 million ($453.05 million), up 156.7% year-over-year. BOSSY’s net income amounted to €25 million ($29.42 million) for the quarter, compared to a €186 million ($218.87 million) net loss in the prior-year period.

BOSSY is expected to witness 29.5% revenue growth for the fiscal period ending December 31, 2021. Over the past six months, BOSSY’s stock has gained 44.1% in price. Also, its stock has returned 69.1% over the past nine months.

BOSSY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. BOSSY has an A grade in Quality and Momentum. Of the 64 stocks in the Fashion & Luxury industry, it is ranked #14.

Click here to see the additional POWR Ratings for BOSSY (Growth, Value, Stability, and Sentiment).

HESAY shares were trading at $145.00 per share on Thursday morning, down $3.24 (-2.19%). Year-to-date, HESAY has gained 34.11%, versus a 20.68% rise in the benchmark S&P 500 index during the same period.

About the Author: Imon Ghosh

Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.


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