Diamonds may be forever, but jewelry stocks are cyclical, even though precious metals and gems have been a store of value for thousands of years.
While most investors probably own some jewelry or have purchased some for a loved one, jewelry stocks are not a closely followed sector. However, jewelry sector stocks offer some of the same benefits as luxury stocks, especially if they have strong brand names. Tiffany's acquisition by Louis Vuitton Moet Hennessy (OTC:LVMUY) makes perfect sense in that regard. Like the luxury sector, jewelry stocks are vulnerable to the same cycles as consumer discretionary stocks; people tend to buy more and spend more on jewelry during good times than bad.
That's one reason to take a closer look at jewelry stocks. After all, the booming stock market and housing markets have padded the balance sheets of many Americans and made it more likely they'll spend large sums on jewelry, meaning jewelry retailers are likely to benefit. Keep reading to see three of the best jewelry stocks you can buy today.
Top jewelry stocks in 2023
|Signet Jewelers (NYSE:SIG)||$3.4 billion||Mid-market jewelry retailer and owner of brands such as Kay, Jared, and Zales.|
|Pandora (OTC:PANDY)||$7.5 billion||Global jewelry retailer.|
|Movado Group (NYSE:MOV)||$801.2 million||Maker of luxury watches.|
1. Signet Jewelers
As the only publicly traded U.S. jewelry retailer worth more than $1 billion, Signet is likely the first stock most investors think of when they think of jewelry. The company has almost 3,000 stores, most of which are in the U.S. under a wide range of brand names. The stock has rebounded strongly with the ebbing of the COVID-19 pandemic, and its revenue has jumped to an all-time high as consumers try to make up for lost time and capitalize on inflated asset prices and rising wages.
As a mid-market retailer with banners such as Zales and Jared, Signet doesn't have the luxury brand power of some other jewelry stocks, making it more sensitive to macroeconomic trends. The company has focused on gaining market share during the pandemic by investing in a digital platform it calls connected commerce.
In October, Signet announced plans to acquire Diamonds Direct for $490 million in an all-cash deal -- a sign of confidence -- and said Diamonds Direct would be immediately accretive to earnings. With adjusted operating income expected to be in the neighborhood of $680 million to $735 million, the market may be underappreciating the rebound in the business.
Denmark-based Pandora has also been benefiting from the pandemic rebound. The retailer targets a higher-end market than Signet and has about 2,700 stores, as well as more than 4,000 distribution points from retail partners.
Pandora has seen strong growth through the first half of 2021, especially in the U.S., and expects full-year revenue to be above pre-pandemic levels even as the company is still experiencing some effects of the pandemic.
Thanks to its strong retail presence and advertising spending, the company has become a mindshare leader in the industry, meaning the first company consumers think about when they think of jewelry. For instance, management says that one-third of all Google searches for branded jewelry are for Pandora. Its strong online profile and higher-end price points have helped it achieve strong operating margins. Under its Phoenix strategy, the company is investing in personalization, brand reach, and expanding its core markets in the U.S. and China. This strategy appears to be paying off.
3. Movado Group
Like the rest of the jewelry sector, Movado soared in 2021 on a strong recovery from the pandemic. The designer and distributor of high-end watches for brands such as Lacoste, Hugo Boss, and Coach has seen recent revenue top pre-pandemic levels. It's responded to the challenges of the pandemic by investing in omnichannel infrastructure and has benefited from a broader wave of demand for luxury products.
The past decade has been a challenging one for watchmakers as smartphones have rendered timepieces mostly unnecessary, and smartwatches have added another level of complexity to the market. Movado has jumped into the smartwatch game with luxury pieces that retail for $1,000 and up. Although most of its business still comes from traditional watches, it's astute for the company to compete for consumers looking for more high-tech features.
Even after Movado's recent rally, it's still priced like a value stock, indicating the market is skeptical of its continuing growth. If it can deliver strong results, the stock has plenty of room to move higher.
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Watch consumer spending
Like luxury items, the diamond market and the broader jewelry sector are sensitive to overall consumer spending as people tend to spend more on such items when the economy is strong. Outside of developing a luxury brand, it's difficult for these companies to build a competitive advantage, but the ones above are all investing in omnichannel capabilities and other ways of strengthening their relationships with consumers.
The market seems to be forecasting slower growth in the industry after the pandemic rally, but if jewelry demand remains strong, these stocks should have significant upside.