Consumers are returning to luxury brands such as Tiffany, and investors should too: Analyst

Key Points
  • Consumers are returning to iconic luxury brands such as Tiffany & Co., Louis Vuitton and Sotheby's that offer updated products and marketing.
  • Retail analyst Oliver Chen says his firm, Cowen, recommends investors consider luxury brands that are "un-Amazonable."

Consumers are returning to the luxury goods sector with updated versions of iconic brands such as Tiffany & Co. and Louis Vuitton. Retail analyst Oliver Chen told CNBC that it's a good place for investors to be too.

"Tiffany is very exciting," Chen, managing director and senior equity research analyst at Cowen Outperform, said Wednesday on "Power Lunch."

"They're becoming a lot more modern," he said. "Customers are returning to Tiffany on the heels of new collections, new product, as well as new campaigns that are innovative, fun, disruptive, as well as tying back to the history of the brand."

"And that blue box is iconic," Chen said.

On Wednesday, the high-end jeweler beat first-quarter earnings estimates with better-than-expected sales in the Americas and Asia. Shares surged about 17 percent and were on track to mark the company's best day since 2001.

But Tiffany isn't the only luxury company outperforming.

Chen, who covers retail and luxury goods at Cowen, said his firm likes the luxury goods sector, including brands such as Moet Hennessy Louis Vuitton and Sotheby's, and said it is "a good spot for investors to be in."

Businesses that specialize in discounted goods — such as TJX Companies, which owns off-price stores Ross Stores and Marshalls, and Costco — are thriving. But Chen pointed out that some cost-cutting measures may affect margins, which in turn affects investors. The analyst said jewelry brands such as Tiffany can leverage prices to get better returns for investors.

"Grocery, food, apparel, where there's less differentiation, that becomes a problem, and people compete on price," the analyst said.

"And that's a big factor for retail over the long term, especially with Amazon and others," Chen said. "Competing on the basis of price is very competitive."

In fact, Tiffany's success may be in part because it is "un-Amazonable," Chen said, referring to experiences that can't be bought online.

CNBC/Marguerite Ward

For Mary Chao, that came in the form of a trip to her local Tiffany & Co. for her daughter's 16th birthday.

"For a $150 necklace, you get the blue box, a pampering and a status symbol," the Brighton, New York, resident told CNBC. "And teenage girls are always looking for status symbols."

"Luxury is trending in the suburbs," Chao said. "For me it's Louis Vuitton. For my daughter it's Tiffany."