US luxury retailers best positioned in sector

By Jennifer Coogan

NEW YORK (Reuters) - U.S. luxury retailers Coach Inc. (COH.N: Quote, Profile, Research, Stock Buzz) and Tiffany & Co. Inc. (TIF.N: Quote, Profile, Research, Stock Buzz) are two of the sector's stand-outs in an environment that currently favors the shopper over the seller, said the head of Esplanade Capital.

Jeweler Tiffany and leather goods retailer Coach are beating out their lower-end domestic competitors, who have been forced to aggressively discount goods for the holiday shopping season, Shawn Kravetz said, speaking at the Reuters Investment Outlook 2007 Summit in New York.

"Unlike plasma TVs and some soft goods, toys at Wal-Mart, and all sorts of things people want that they've been able to get very, very cheaply, the high end isn't on sale yet. Coach isn't on sale," Kravetz said.

Tiffany and Coach also have an edge on their European peers, thanks to the steep depreciation of the U.S. dollar versus the euro, Kravetz said.

The dollar index -- a measure of how the greenback fares against six major currencies -- is down around 9 percent year-to-date. It is on pace for its largest annual decline since 2003. The dollar has tumbled to 20-month lows against a basket of six major currencies in the last few weeks, driven lower by expectations that U.S. economic growth will continue to slow and force the Federal Reserve to cut interest rates.

A drop in the dollar both makes U.S.-made goods cheaper for European buyers, while making comparable European-made luxury items more expensive for U.S. consumers.

"If you're buying Hermes, Bulgari, Cartier, et cetera, you are buying in weak dollars and those euros are awfully expensive," Kravetz said.