Investing in Luxury Stocks

You may not be able to define luxury, but chances are good that you know it when you see it. Luxury goods are the opposite of necessities. They're high-end products that consumers want but don't need. They're also distinct from commodity products (such as bananas or gasoline) that are not easily distinguished by brand.

Luxury goods are more expensive than competing products because they are perceived as higher-quality and confer status on the owner. Because of that relationship, brand is a crucial component of a luxury stock. Luxury stocks are publicly traded companies that sell luxury goods, which could be anything from cars to cosmetics to fashion to furniture.

The best luxury stocks have strong brands, high operating margins, and timeless products.

As non-necessities, luxury goods resemble high-priced discretionary goods, making them the opposite of consumer staples, or everyday products, such as groceries, that consumers buy because they need them. Although luxury goods may sometimes be durable goods, such as cars, they can also be consumables -- cosmetics or cigars, for example.

Investors most often think of retail products when they think of luxury. Those may include fashion from brands such as Burberry Group (BURBY +0.99%), Jimmy Choo, which is owned by Capri Holdings (CPRI -1.59%), or Stuart Weitzman, which belongs to Tapestry (TPR -0.17%). However, the sector goes beyond retail to include travel, food and dining, and even services.

The five stocks have outperformed the S&P 500 (INDEX:^GSPC) over their histories and generally benefit from a bull market, an expanding global economy, and increasing wealth among upper-class consumers who profited in the pandemic stock market boom. Because these companies count on wealthy customers, their performance is highly correlated with macroeconomic indicators such as the stock market or real estate prices.

RH, the company formerly known as Restoration Hardware, has mastered the market for expensive home goods. The company sells items that include $5,000 dining tables and $8,000 leather couches based on a modern and contemporary design motif. RH uses mailed source books and thick catalogs to stimulate demand, and it sells its wares from a handful of splashy galleries across North America and Europe. Under the leadership of CEO Gary Friedman, the company successfully pivoted to a membership model, selling annual memberships at $200 in exchange for 25% discounts on merchandise. The policy has encouraged repeat purchases and customer loyalty.

Its next step is transitioning to a lifestyle brand as the company has started opening up hotels, restaurants, and private jets, and launched a media platform based around architecture and design.

Business has been sluggish in the wake of the COVID-19 pandemic, as mortgage rates have been elevated and the housing market slowed down; home sales are a key driver of spending on home furnishings. Nonetheless, the company should return to steady growth as the housing market normalizes, and the stock looks cheap if it can return to its earlier level of profitability.

LVMH is the world's biggest luxury company, valued at roughly $264 billion. The company has diversified holdings in wine and spirits, luxury fashion and leather goods, perfumes and cosmetics, and jewelry and watches, among other businesses. It's been a prolific acquirer of luxury brands, adding Officine Universelle Buly, a French perfume and cosmetics company, in October 2021 and Tiffany in January 2021. In recent years, much of the company's growth has come from mainland China, where an emerging upper class and a culture of conspicuous consumption have supported growth across much of the luxury market.

LVMH has struggled of late in line with broader trends in the luxury sector as demand in China has been and trade tensions have weighed on the company.

In the first half of 2025, revenue fell 4% to 39.8 billion euros, and operating profit slipped 15% to 9 billion euros, giving it an operating margin of 22.6%. Sephora stood out as a bright spot for the company.

LVMH's diversification stands out in the luxury industry and gives the company a competitive advantage since it can rely on a wide range of businesses to drive profit.

Ferrari, the high-end sports car maker, employs a classic luxury selling technique. The company limits its production to support high prices and wide operating margins. Artificial scarcity, as this strategy is known, helps create demand for a product as it becomes an exclusive status symbol. Since not everyone can have one, people naturally want it more.

Ferrari's management has argued that the company should be valued more like a luxury company than an automaker, and it earns a higher multiple than its auto sector peers. Like LVMH, the company has found a ripe market in China, and it's burnished its profits by selling limited-edition cars at prices topping $1 million.

Performance remained strong through the first half of 2025, with revenue rising 9% to 3.6 billion euros, and it reported a 30.6% operating margin.

Unlike some of its luxury peers like LVMH, Hermes only has one brand instead of diversifying across multiple labels.

The company is best known for leather goods such as handbags, but it also sells fragrances, watches, jewelry, accessories like eyewear, fashion apparel, and home furnishings.

Hermes has embraced the artificial scarcity strategy, producing a limited number of items, and is known for its dedication to craftsmanship and high quality. Some of its products are made by just one artisan.

The brand also tends to avoid high-profile marketing, choosing to rely on the quality of its products and word of mouth instead.

During a challenge period in the luxury sector, Hermes has delivered steady growth as constant-currency revenue was up 8% with an operating margin of 41.4%.

It also reported growth in all of its geographic areas, with growth led by leather goods.

Moncler is best known for its high-end outerwear, including down jackets and puffer coats. It's a competitor to Canada Goose, though it's outperformed that rival on the stock market in recent years.

The company was founded in 1952 near Grenoble, France, with the intention of making sportswear suitable for wearing on the mountain.

In 2003, Remo Ruffini, who is now the CEO, acquired the company and remade it as a luxury brand, and expanding its product portfolio from outerwear to complementary products.

Its jackets retail from $1,000 to $2,000, and use premium materials, including goose down sourced from European farms.

The company also owns Stone Island, an Italian luxury brand that specializes in menswear, including sweaters, jackets, and outerwear. Stone Island contributes about 15% of its total revenue.

Moncler's first-half 2025 results were modest, with revenue up 1% to $1.2 billion euros, and its operating margin fell from 21% to 18.3% due in part to a shift in its marketing.

Roughly half of Moncler's revenue comes from Asia, and it primarily relies on company-owned stores and e-commerce to sell its goods.

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