Sterling results from Tiffany and J. Crew could signal high-end holiday boom

For the luxury retailers lucky enough to make it through the steep recession, business is looking good again. And investors should consider taking a look at their stocks ahead of what might turn out to be an unexpectedly strong holiday season for high-priced goods.

On Wednesday, jeweler Tiffany & Co. (TIF) breezed by third quarter earnings expectations and issued a bullish outlook for the year ahead. Shares of the company rallied about 5% in trading, and lifted other jewelry sellers like Zales (ZLC) and online merchant Blue Nile (NILE) along with them. Tiffany's results follow strong quarterly results from upscale retailer J. Crew (JCG) -- shares soared almost 8% -- where analysts at Credit Suisse note that "business is gaining momentum without the need for significant promotions" and that November also looks like a strong month.
The recession has been marked with tales of consumer belt tightening amid a "new frugality" -- and rightly so, given rocketing unemployment. But even as many struggle to scrape buy, investors should note that some wealthy customers have also seen their assets boom amid a sharp stock market rally -- and may be poised to see further gains as the holiday season approaches. This could lead to a much healthier end of the year for the luxury retailers who remain standing.

About 1,500 jewelry sellers -- most of them mom and pop shops -- have gone under since the start of the year, The Wall Street Journal reports. That has allowed bigger chains to take market share. While the Commerce Department said that jewelry sales at specialty outlets were down 10.2% for the first nine months of the year, sales at large chains like Signet (SIG) -- which owns Kay Jewelers -- were off only 2%.

Other sectors are also likely to have seen this kind of consolidation, particularly as credit to small business remains tight.

As the stock market rallies, the high-end customers who tend to own large chunks of shares have started to ramp up their spending again. Luxury car sales picked up sharply in October, analysts at Stifel Nicolaus pointed out prior to Tiffany's results, and car sales tend to serve as a solid gauge for spending on other luxury items as well.

The boost in luxury car sales would mark a sharp turnaround from a year ago, when the purchases of discretionary items like high definition TVs tumbled following the collapse of investment bank Lehman Brothers and the ensuing financial panic.

Of course, the sharp rally in the stock market since March might be expected to burnout as the end of the year approaches -- thereby sapping the new-found confidence of rich shoppers. But history suggests that December is likely to follow the gains from the start of the year, according to analysts at Goldman Sachs. "In years when the return from January to November has been strong, December has tended to be strong as well."

That could mean more gains are in store for the stocks of expensive luxury items.
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