3 Luxury Stocks That Are Worth the Splurge

Some better-performing luxury stocks may be worth the splurge, even with consumer spending in a somewhat uncertain spot. Indeed, we’ve heard quite a bit about consumer frustrations with higher prices on a wide range of goods, from fast food to everyday grocery items. You won’t hear how alarmingly expensive those LVMH Moet Hennessey Louis Vuitton (OTCMKTS:LVMUY) Louis Vuitton handbags have become in recent years.

Count the luxury goods maker as getting a “free pass” amid the past few years of inflation. Not only have such high-end goods seen resilient demand amid post-pandemic inflation, but some consumers view higher prices as making the good even more desirable.

Indeed, luxury goods stand out in a class of their own regarding discretionary retail. As inflation falls flat on its face, the big question is whether the very highest end of retail can continue to thrive. I bet that it can.

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LVMH Moet Hennessey Louis Vuitton (LVMUY)

The logo for the luxury goods holding company LVMH is seen through a magnifying glass on the company's website.

Source: Postmodern Studio / Shutterstock.com

LVMH stands out as one of the best luxury goods stocks to own if you want to play affluent consumers. The company behind Louis Vuitton and Christian Dior has done an applaudable job of maintaining brand affinity, especially compared to rivals like Gucci parent Kering (OTCMKTS:PPRUY), which has endured a painful fall from grace in recent years.

In the luxury scene, building a brand from the bottom up can take decades or even more than a century. However, all it takes to tarnish the brand are a few quarters of sub-par moves. As such, high-end retail firms must be cautious about how they price their products and the categories they seek to expand into. Otherwise, the margin-commanding power of upscale brands stands to be challenged.

LVMH has done a great job of staying within its circle of competence. You won’t find Louis Vuitton marked down at a local boutique, nor will you find the brand rotating into outlandish product categories.

Though LVMH has felt a pinch amid a slowdown in luxury demand, the firm will be in a good spot come the next boom. At 24.4 times trailing price-to-earnings (P/E), LMVUY stock looks tempting after its latest dip, given the enviable power of its many brands.

Kering (PPRUY)

Handsome stylish man in beige suit at home sitting on sofa; luxury goods and experience stocks. global stocks to buy

Source: 4 PM production / Shutterstock.com

Kering is the luxury retailer best known for its Italian fashion brand Gucci. Unlike LVMH, Kering isn’t all that diversified, with Gucci pulling in a lion’s share of the sales. Of late, Gucci hasn’t been firing on all cylinders, with PPRUY stock currently sitting at a multi-year depth of around $35 per share.

The company recently reported underwhelming guidance as Gucci reported relatively weak sales. Whether it’s the discount rack or the growing number of counterfeit Gucci products that have flooded the market, Kering does not have an easy solution as it faces what seems to be a drastic sag in luxury goods as a whole.

Though Gucci isn’t experiencing its finest moment, I still view the brand as one of the biggest status symbols. At 13.2 times trailing P/E, PPRUY stock seems to be on the discount rack. Whether investors snatch it up in the face of what could be a sluggish second half, though, remains the million-dollar question.

Hermès (HESAY)

Source: Shutterstock

Finally, we have French luxury goods firm Hermès (OTCMKTS:HESAY), the priciest of this high-end trio of stocks, trading more than 52 times trailing P/E.

At writing, HESAY stock is fresh off a 10% correction from its all-time highs in March 2024, thanks partly to a surge in turbulence across the luxury goods industry. I view the correction as a great buying opportunity for investors who want high growth in high-end goods.

The company behind the iconic and incredibly expensive Birken Bag has developed brand affinity over more than 185 years. Indeed, it takes nearly two centuries to build up such brand power, but only a few nearsighted moves to erode a big chunk of it.

The good news is that Hermès has done a better job than most rivals at building up brand power to this day. It’s avoided discount racks while driving a sense of scarcity and exclusivity with certain goods such as the Birken Bag.

You don’t simply walk into a Hermès boutique and buy a Birken bag. Typically, getting a spot on a waitlist would be best. Other times, merchants may grant you the ability to purchase one, provided you’re a loyal customer already spending a great deal with Hermès.

Indeed, whenever the sticker price is not enough to buy a good, you have a pretty powerful brand, perhaps one that could withstand an industry downturn.

On the date of publication, Joey Frenette did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Joey Frenette is a seasoned investment writer specializing in technology and consumer stocks. Contributing to the Motley Fool Canada, TipRanks, and Barchart, Joey excels in spotting mispriced stocks with long-term growth potential in a fast-paced market.

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