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Thursday, 17 November 2011 |
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The FashionUnited closed Wednesday down by 5.27 points
to 1,315.15. Big players such as A&F, Jones Apparel or JC Penney dragged down the international fashion benchmark index.
Jones Apparel was one of Wednesday's notable stocks in decline, down 3.3% to $11.41. In comparison, the Dow is down 0.6% to 12,019 while S&P was currently down 0.6% to 1,251. Jones Apparel has overhead space with shares priced $11.41, or 20.8% below the average consensus analyst price target of $14.40. The stock should find resistance at its 200-day moving average (MA) of $11.84, as well as support at its 50-day MA of $10.82.
Meanwhile, Morningstar´s analysts focused on athletic footwear market, as they “expect positive sales trends and margin implications from Foot Locker when the company reports after the market close on Thursday, as most athletic footwear and apparel makers have been reporting positive results and the products offered for the holiday season appear to be connecting with consumers. We believe vendors such as Nike NKE have given Foot Locker plenty of premium product, and the battles in the basketball and running markets have been benefiting athletic retailers in general. Dick's DKS announced positive same-store, third-quarter sales on Tuesday.”
“Looking further toward the future, we view Foot Locker as a no-moat stock and note that it has not meaningfully grown its store base, net of closings, for decades. Foot Locker also pays relatively high rent per square foot, and has a higher percentage of older malls in its domestic store portfolio. On the international front, Foot Locker makes higher margins but as most retailers have experienced, it is harder to find attractive retail space to open stores. However, we believe that in the medium term, Foot Locker is getting some cost relief in the malls that serve lower social strata. The company is one of the few tenants that is posting positive comparable-store sales in lower-traffic malls, and can negotiate better rents as those stores renew leases. This has positive implications for Foot Locker's cash flow and earnings, and since it is low-growth, the company has been smartly paying down debt and increasing its dividend.”
BMO Capital Markets downgraded shares of Abercrombie on Wednesday to market perform from outperform. "We now see greater gross margin deterioration than we previously anticipated and believe the pace of margin recovery will take longer than expected, particularly given management's aggressive promotional stance in the domestic channel," retail analyst John Morris said in a research note. In the wake of the results and the downgrade, Abercrombie shares sank more than 15% in Wednesday trading.
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