After all the Occupy Wall Street news over the last few weeks, it may seem kind of ironic that luxury retailers have been among the top-performing stocks since the market started falling in late July. While the S&P 500 is up about 6% over the last three months (subject to extreme change almost every hour), many luxury retailers are posting strong double-digit growth. This isn't surprising -- over the last three years, many of these stocks have been triple-baggers or better.
Despite the old adage that if you have to ask how much something costs, you probably can't afford it, it's important to ask how much a stock is worth before buying it. Let's take a look at some of the top performers and see if you should add any of them to your investing wish list.
Santa Rally, slip a triple-bagger under the tree, for me
Despite some ups and downs, owning one of the worst of these stocks, Liz Claiborne
Luxury retailers have been fantastic investments, and with good reason. As wealth inequality increases, retail is becoming increasingly bifurcated, with many deep-discount stores doing just as well as their luxury counterparts, while midrange brands founder.
This doesn't necessarily mean sales have been fantastic. In fact, aside from Liz Claiborne, they haven't been much better or worse than the average of all retailers. Average sales growth for luxury retailers is still fairly impressive given the weak economy, but it doesn't explain the massive share price appreciation.
The answers are mixed. Gross margin at Coach
Also worth noting is that Liz Claiborne has improved gross margin the most, but it's safe to assume it will improve even further going forward. The company recently sold all of its mid-priced brands to J.C. Penney
Santa Rally, I've been an awfully conservative investor
These are generally good businesses, but after returning several hundred percent in such a short period, are any of them cheap enough to buy today?
Judging by their enterprise-value-to-free-cash-flow ratios, none of them are particularly attractive, especially Tiffany and Ralph Lauren
Just because none of these luxury stocks are bargain-priced doesn't mean they aren't worth keeping an eye on. Williams-Sonoma has improved its business a bit over the last few years, and Liz Claiborne is making some big changes to its brand portfolio, which might pay off considerably. These two are definitely worth adding to My Watchlist, the Motley Fool's wish list for investors.
Fool contributor Jacob Roche holds no position in any of the stocks mentioned. Check out his Motley Fool CAPS profile or follow his articles using Twitter or RSS. The Motley Fool owns shares of Coach. Motley Fool newsletter services have recommended buying shares of Coach and Williams-Sonoma. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.