As the echoes of the recession linger, consumers' lips may be saying they need the value offered to them by the likes of Wal-Mart (NYSE:WMT) but consumers' dollars are telling a different story.

Whether they can afford to or not, many consumers are reviving their spending on luxury goods, fashion labels and pricy electronics. Investors take note - this holiday shopping season could throw a curve ball that doesn't completely favor value-oriented gift-giving after all.

IN PICTURES: Learn To Invest In 10 Steps

Stacking Up the Clues
It was the higher-end goods that were the first to fall out of demand in mid-2008, a problem that was still lingering as of a quarter ago. But, we may be turning the corner, if the data nuggets are painting a collective picture.

Take Black Friday's online sales for starters. Most e-commerce sites saw an increase in traffic and an uptick in revenue. However, jewelry retailers saw a massive 25% increase in the average order size.

Online jeweler Blue Nile (Nasdaq:NILE) just completed its strongest Black Friday weekend ever, with a notable improvement in - and this isn't a typo - sales of items costing more than $20,000. Blue Nile also said business was good because items that cost $500,000 through other retailers would only cost $350,000 through them. The dollar amounts cited confirm the company's spokespeople are out of touch with the common man, but, they still have a point.

Bricks and mortar rival Zales (NYSE:ZLC) saw an improvement of its own last quarter. Though the jeweler still took a loss, it beat the Street's estimate, as did Tiffany & Co. (NYSE:TIF).

Not Just Jewelers
Saks (NYSE:SKS) surprised the market a couple of weeks ago by turning in its first quarterly profit in a year and a half. As well, Nordstrom (NYSE:JWN) recently upped its 2009 earnings forecast.

The most decisive piece of evidence, however, came from Unity Marketing. The market research firm's luxury consumption index showed a 29% increase in luxury spending between Q2 and Q3 of this year. Granted, it was the ultra-affluent (annual household incomes of $250,000 or more) that drove the bulk of the jump, but it's a jump that favors luxury, and even just high-end, retailers all the same.

The point is it's not likely to be a tepid Christmas across the board despite what the early shopping numbers may suggest. Instead, watch for two levels of Christmas cheer: one that favors value, and another favoring a revival of luxury (even if tempered) gift-giving. The middle-ground retailers may be left in the cold.

On that note, here are three great ways to play the revival of luxury and pricy "toy" gifting as we progress into the heart of the shopping season.

Wants Trump Needs
Though it's prudent to suspect all retailers will fare at least slightly better than expected this holiday season, based on the trend described above, some should shine more than others.

For example, consider Best Buy (NYSE:BBY). The recession has not been kind to its sales or earnings. However, though Black Friday weekend shopping was mediocre for the retail industry, sales of electronics like TVs or cameras were up 6%. Given that Best Buy has a strong store presence side by side with its website - the fourth most shopped website on Black Friday - this tech retailer stands to dole out some impressive numbers for the current quarter.

Though some would not call Nordstrom a "pure luxury" name, it's not Wal-Mart either. Either way, it's a well-run company that has remained profitable when many of its peers have not. Management has demonstrated the ability to adapt to the economic environment, and they're adapting to the current rebound in higher-end spending from some consumers while remaining cognizant of the value needs of others.

Claymore/Robb Report Global Luxury ETF (NYSE:ROB) might appear to be a very generic way to tap into luxury retail spending, and it is. But ROB owns a lot of foreign high-end retailers and luxury goods manufacturers like Swatch Group, Porsche, Coach (NYSE:COH) and Christian Dior just to name a few. Many of its holdings aren't available to American investors in any form, not even as pink sheet stocks or ADRs. And many of its constituents cater to the ultra-affluent mentioned above as the biggest reason luxury spending was revived last quarter.

The Bottom Line
While many have prepared themselves for a thrifty holiday season, the affluent are kicking their luxury spending into high gear. Getting in on the luxury players might lead to a nice surprise for investors.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Economics

    Is a Recession Coming?

    In the space of a week, the VIX Index, a measure of market volatility, spiked from 13, suggesting extreme complacency, to over 50, evidencing total panic.
  2. Stock Analysis

    Net Neutrality: Pros and Cons

    The fight over net neutrality has become an amazing spectacle. But at its core, it's yet another skirmish in cable television's war to remain relevant.
  3. Investing

    What’s Holding Back the U.S. Consumer

    Even as job growth has surged and gasoline prices have plunged, U.S. consumers are proving slow to respond and repair their overextended balance sheets.
  4. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  5. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  6. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  7. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  8. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  9. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  10. Professionals

    What to do During a Market Correction

    The market has corrected...now what? Here's what you should consider rather than panicking.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. The New Deal

    A series of domestic programs designed to help the United States ...
  3. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  4. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  5. PT (Perseroan Terbatas)

    An acronym for Perseroan Terbatas, which is Limited Liability ...
  6. Ltd. (Limited)

    An abbreviation of "limited," Ltd. is a suffix that ...
RELATED FAQS
  1. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  3. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  4. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  5. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
  6. How does the risk of investing in the industrial sector compare to the broader market?

    There is increased risk when investing in the industrial sector compared to the broader market due to high debt loads and ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!