Burberry Group (BRK) recently rained on the "luxury goods are
resilient" parade. The British fashion firm warned in mid September
that same store sales were flat for the first 10 weeks of the
quarter, the worst showing since 2008. Burberry attributed sluggish
revenue to the fact that the 1% 'round the globe -- especially
China -- have seemingly taken to belt-tightening amid continuing
Faster than you can say tartan, Burberry stock was slammed,
falling 25% (and staying there) during a stretch of a few weeks
where the S&P 500 was up 2%.
In an interview with the Wall Street Journal, Burberry's CFO
decided to spread the gloom, stating "It's not necessarily being
felt by all of our peers, but we're certainly not alone." That
guilt by association sent LVMH Moet Hennessy Louis Vuitton down 8%.
) took an even steeper hit, as seen in this
Stateside, Nordstrom (
) also got smacked by the Burberry warning contagion.
As did Saks (
Two weeks later Prada stepped in with a far more upbeat report
that profits in the first half of the year were up 56%. Prada's CEO
characterized the notion that luxury goods are doomed as
"hysteria." For the record, China's economy is indeed downshifting
to a slower growth rate, but at a projected 7% rate that's not
exactly spelling the end of conspicuous consumption.
And that raises an intriguing opportunity. Negative hysteria can
translate into bargains. Just take a look at how far Coach's
has fallen of late.
COH PE Ratio
Even Tiffany (
), which proved more resilient during the Burberry sell off (gold
is a popular store of value in many Asian countries) has seen a
sharp pull back in its valuation, based on
TIF PE Ratio
The upshot of the Burberry warning may be that savvy investors
can now pick up luxury retailers at outlet prices.
Carla Fried is an editor for the
YCharts Pro Investor Service
which includes professional