Accessories may be the ultimate vanity plays, Cramer said during Thursday’s Mad Money. And given that the top quintile of US wage earners are growing their incomes four times faster than the middle quintile, the market for this high-end merchandise should outperform its cheaper, though lower quality, competitors.
“As long as the rich get richer,” Cramer said, “this part of the retail biz is fine—even if everybody else gets poorer.”
His top players in this group are Coach and Tiffany , both of whom successfully navigated their way through the most recent recession. They also share a couple of other traits, namely that they offer decent dividends and stock buybacks, as well as the ability to attract aspirational customers and the uber-rich.
Coach, known for its handbags, among other things, has a strong presence here at home in the States and overseas, specifically China. And Cramer thinks the Chinese market could be Coach’s largest source of revenues in another 10 years. The Mad Money host also praised management for putting a focus on the Middle Kingdom, in addition to positioning the company for “major growth ahead,” as Coach’s square footage is expected to increase 11% in 2011.
Tiffany, the second largest jewelry seller after Cartier, dominates the diamond market. But it, too, is focused overseas, extending its footprint to emerging markets with growing middle classes. Asia alone makes up 35% of total sales, with a “huge rollout” in China. According to analysts, the company has the potential to grow its store base by at least 45% over the next seven years, so there’s still more growth to be had as well. Plus, management raised guidance when it reported at the end of August.
“You don’t do that if you think business is getting weaker,” Cramer said.
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