Just in Time for the Holidays: Luxury Comes Back

Just in time for the holidays, it looks like the luxury consumer is back.

Shoppers look at handbags at a Coach store in Pasadena, California.
David McNew | Getty Images
Shoppers look at handbags at a Coach store in Pasadena, California.

“We’ve been hearing that luxury goods sales globally, have been accelerating, and it’s in all categories, whether it is watches and jewelry or whether it is fashion and leather goods," said Dana Telsey, chief information officer at Telsey Advisory Group, in an interview on CNBC. "The demand is there.”

As the year has progressed, a trend emerged where higher-income shoppers came back to the stores to buy—and the trend has continued as long as the stock market is heading higher.

Just to be clear, this isn't the heady, spend-with-abandon-type buying we saw before the recession, but it is enough of an uptick to make a significant difference, and allow luxury retailers to see a jump in sales.

It's also enough to pique interest in luxury goods this holiday season.

Want proof? Look at the earnings of retailers such as Coach.

According to Telsey, as long as there is "newness and innovative product," upper-income consumers are buying, and these customers aren't as sensitive to price fluctuations as those at lower income levels.

Tiffany's has had some success with the launch of its "Keys" pendants. According to Telsey, sales volumes of these items were at least "four-to-six-times greater than a typical launch at the retailer," she said.

There also is a lot of buzz about the company's new handbags and leather goods.

Those new products—and the excitement around them—are critical.

"If you don’t have anything that’s working for you, if you don’t have any hit item, you are just going to be flooded with markdowns and that’s going to be the key issue," Telsey said.

Although she didn't name any specific retailers, she said that there are some apparel retailers and music retailers that are in this category.

Telsey isn't alone in her view.

Matt Shay, the head of the National Retail Federation trade group, gave a speech Wednesday where he said he expected luxury and department stores to be the biggest beneficiaries of the expected growth in the U.S. retail market this holiday season.

The trade group estimates sales will rise 2.3 percent this Christmas shopping season.

Although many holiday spending surveys have been released already, a fresh batch from retail analysts are expected this week.

Several have mentioned a bifurcation in spending patterns between the upper and lower incomes.

Richard Hastings, a consumer strategist at Global Hunter Securities, said higher-income tiers are spending more continuously on a wide variety of goods and services. Their spending is most closely tied to the performance of the capital markets.

Meanwhile, in lower-income tiers, there is choppy spending. These consumers come and spend around specific occasions such as back-to-school or the upcoming Christmas season, but in order to afford those purchases they tighten spending between these events.

Hastings expects retail sales between November 2010 and January 2011 will rise 2.14 percent.

In this climate, Telsey's favorite retail stocks areLimited, Macy's, and Tiffany. In the super-luxury sector, she likes Hermes and LVMH.

Questions? Comments? Email us at consumernation@cnbc.com