Coach & Burberry down as Eurozone doubts increaseThursday, 20 October 2011
Wednesday the FashionUnited Top 100 Index closed in
1,280.33 down by 9.11 oints in a session owned by textile giants such as Nike and Coach laying all their hopes in China, and Crocs´shares losing value but remaining as a must for daring investors.
U.S. markets were little moved overnight as investors digest earnings, await new inflation and housing data, and examine possible outcomes for Europe's debt crisis. BMO Capital Markets attributes the upbeat tone in Europe to rumours that the European Financial Stability Fund could get upsized to as much as €2 trillion, according to the Guardian, or €1 trillion, according to the Financial Times.
Influenced by the gloom perspectives for Euro, The Share Centre downgraded Burberry to a sell. Nick Raynor, investment adviser, explained on that "Recent results reported that turnover in the Asia Pacific region had increased by 62%. Although this may have pleased growth seeking investors, for us it highlighted Burberry's dependency on China. Turnover was lower in other regions rising by 12.5% in Europe and by 9% in the Americas. Chinese consumers are becoming more affluent and spending more on luxury goods, however growth in the region has started to slow and it is uncertain how long this trend will continue. He added that "Burberry's PE valuation is close to the sector average and it is forecasted to fall below average in the next two years. Further growth could therefore be a struggle for the company and, should Asian markets weaken, we could see substantial downside to the share price.
Across the Atlantic, analysts from www.shinesrooms.com outstansted as rising values to invest in Nike and Cach. Whereas Nike Inc. reported annual sales of $2.1 billion last year in China and aims to generate $4 billion in sales from China by fiscal 2015. First quarter sales reached $528 million in China and Nike appears capable of reaching its lofty aims. The key for Nike will probably be converting the sports fan culture into one that actively plays sports as well. Nike plans to open more stores and sign more endorsement deals with Chinese stars to move closer to its $4 billion in annual sales goal.
Similarly, luxury accessory and gift maker Coach Inc. is also looking to China to grow sales. The company reported strong earnings out of China in the 4th quarter of 2011 and aims to keep improving them. Coach plans to expand its global distribution model and invest more in China to capitalize on the growing middle-class and higher disposable incomes.
Elsewhere, shares of Crocs Inc. lost almost 40% of their value Tuesday, wiping out gains for the year, after the shoe maker lowered its third-quarter profit and sales forecast. While the company still projected higher profit and a sales gain of about 27% even after the guidance cuts, investors were spooked by a stock CROX -1.05% that once peaked at around $75 in October 2007 and then plummeted to about $1 in November 2008, analysts said. In an interview with MarketWatch, Crocs President and Chief Executive John McCarvel said the company’s growth trajectory is still solid despite the $5 million sales shortfall it experienced in the third quarter. He said the Crocs today is different from Crocs in 2008, when North America alone represented over 60% of its total business.