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Luxury Retailers Will Shine Again: Strategists

Luxury retail companies have been beaten down heavily due to the financial crisis, but they’re slowly starting to make a comeback as consumers start to open their wallets again, said David Schick, luxury retail analyst at Stifel Nicolaus, and Scott Krugman, vice president at National Retail Federation. (For Schick's stock picks, see below.)

Luxury retailer Tiffany reported higher-than-expected quarterly earnings on Friday, thanks in part to cost cuts, and the company raised its full-year outlook as demand for jewelry increased.

“If [Tiffany’s] can show that the business can get a little less bad now, which they did—and that the customer is mixing well—then I think these are expenses that deserve to be cut and we’ll see where they take it as they keep growing their business,” Schick told CNBC.

"I think they’ve positioned themselves well and kept the brand classic.”

Investing and Retail Insights:

In the meantime, Krugman said the luxury consumer is “stressed” and needs more proof that the economy is going to come back.

“Ultimately, they’re going to return to shopping. There’s a lot of pent-up demand right now from customers, which benefits companies like Tiffany in the fourth quarter,” he said.

Krugman said he expects consumers to spend on the discount level before returning to the luxury goods.

“At first, it’s going to happen on the discount level so you’re going to see places like Wal-Mart and Target benefit from people buying big screen televisions, but that’s going to slowly make its way into the luxury market,” he said.

“The affluent shopper needs a little more proof that the economy is coming back.”

Schick Likes:

Tiffany

Coach

Krugman Likes:

Tiffany

Coach

Saks

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Disclosures:

Stifel Nicolaus expects to receive or intends to seek compensation for investment banking services from Coach in the next 3 months. Schick does not own shares of Coach or Tiffany.

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