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Inside Secret for Trading Luxury Retail

Wednesday, 11 Jul 2012 | 6:17 PM ET

With all the chatter about the high-end starting to crack, lots of investors are taking a second look at luxury retailers trying to figure out which are buys on a sell-off and which are not.

The assumption is that any high-end retailer with big exposure to China or Europe is in trouble.

Well, before you make your next move there’s something else you need to know about the high end – and unless you’re a pro who trades the sector regularly, you probably don’t.

Luxury retailers that control their brands are far more desirable to hold than luxury retailers who sell other people’s brands.

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That’s according to Kantar retail analyst Bryan Gildenberg who regularly provides channel checking information to clients. “We are far more confident in luxury retailers that control brands. There’s more margin in that.”

China Slowdown Hitting the High-End?
A slower economy in China is hitting high-end retailers, like Burberry. Bryan Gildenberg, Kantar retail analyst, explains the tough situation luxury retailers are facing.

He says Burberry’s is a good example of a retailer that sells its own brand.

“They’ve done a marvelous job,” he says. "They’ve put a lot of thought into what the brand is – and what it looks like and what the footprint is."

Sounds like Burberry’s may be a stock worth putting on your radar.

By comparison he cites Saks as a seller of other people’s brands.

“Saks worries us,” he says. “In the end, when you’re relying on single items to drive (shopping) trips – those items can get picked off and that’s what I think is happening, now.”

Posted by CNBC's Lee Brodie

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Trader disclosure: On July 11, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Tim Seymour is long BAC; Tim Seymour is long INTC; Tim Seymour is long SBUX; Josh Brown is long AAPL; Josh Brown is long JPM; Josh Brown is long GDX; Josh Brown is long GLD; Josh Brown is long XLU; Josh Brown is long TLT; Josh Brown is long XLF; Josh Brown is long WMT; Josh Brown is long TGT; Guy Adami is long C; Guy Adami is long GS; Guy Adami is long INTC; Guy Adami is long AGU; Guy Adami is long NUE; Guy Adami is long MSFT; Guy Adami is long BTU; Brian Kelly is long EURO; Brian Kelly is long TIP; Karen Finerman is long AAPL; Karen Finerman is long BAC; Karen Finerman is long JPM; Karen Finerman is long WMT; Karen Finerman is long TGT; Karen Finerman is short SPY; Karen Finerman is short IWM; Karen Finerman is short MDY

For John Ehrhardt
Nothing to disclose

For Jeff Kilburg
Jeff Kilburg is long SPXU
Jeff Kilburg is long TBT

For Mike Greene
In the past 12 months, Benchmark or its affiliates have receive compensation for investment banking services from the subject Company: SWHC
In the past 12 months, Benchmark or its affiliates have managed orco-managed a public offering of securities for the subject company: SWHC
The research analyst, a member of the research analyst’s household, any associate of the research analyst, or any individual directly involved in the preparation of this report has a long position in the shares or derivatives of the subject company: SWHC
A member of the research analyst’s household serves as an officer, director or advisory board member of the subject company: SWHC
Benchmark makes a market in the securities of the subject company: SWHC

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