NEW YORK — It seems hard to believe luxury retail spending could maintain such a strong course for so long. While there is evidence on Wall Street of luxury’s potential decline, it’s the individual companies rather than the group as...
NEW YORK — It seems hard to believe luxury retail spending could maintain such a strong course for so long. While there is evidence on Wall Street of luxury’s potential decline, it’s the individual companies rather than the group as a whole who are showing signs of weakness.
Meanwhile, several luxury companies continue to report and project huge increases in profits and sales.
Stepping back a bit, luxury spending had rebounded sharply in late 2002 — along with the turnaround in the financial markets — and hit full-blown proportions in 2003.
If you believe the strength of luxury spending is tied to the market’s performance, however, high-end retailers could start to see fewer consumers “trading up” for coveted luxury items while loyal customers could begin to limit their spending.
The Dow Jones Industrial Average hit a two and a half year high in late January, nearly eight months ago. The market has been wobbly because high oil prices, the turmoil in Iraq and the uncertain outcome of the presidential election has kept many investors on the sidelines.
Nevertheless, Eric Beder, senior equity analyst at J.B. Hanauer and Co., recently initiated coverage of two luxury retailers — each for different reasons.
The analyst said jewelry and watch retailer Movado Group is “on the money,” but he called Saks Inc. “a compelling value play,” which is in light of the company’s recently reported wider quarterly loss. A stock is considered a value play when the company is in a rough patch, but is expected to turn around. Investors scoop up shares at discounted prices because they’re banking on the company’s operational improvements to consequently boost the stock price. Eventual success, however, is not guaranteed.
Saks’ “results for fiscal year 2004 will remain somewhat mixed, reflecting the cost of a number of key upgrades,” Beder said in a Sept. 13 research note. Shares of Saks have responded in turn to its disappointing news, and at around $12, sit just above their 52-week low of $11.21 reached on Sept. 29, 2003. “Investors have punished the company for the slow pace of the turnaround and Saks’ inability to drive upside in a period of spending frenzy by the high-end shopper and a stanching of bleeding by the department store sector,” Beder said.On the other hand, Movado has a lot going for it, according to Beder, due in part to its control of several names in the luxury and moderate arena beyond its “iconic” Movado brand offering. “The company’s retail boutique expansion has provided a significant platform to position Movado as a key lifestyle resource; we believe the chain is on the cusp of profitability,” said Beder.
Shares in Movado, currently trading at about $17, are poised to surpass their 52-week high of $17.97 hit on June 30.
Another accessories retailer, Coach Inc., remains on a roll, while the fate of Tiffany & Co. is being questioned. The leather keeps flowing at Coach, which last week upped its first-quarter earnings and revenue guidance. Pacific Growth Equities analyst Andy Graves said the company’s line embodies “luxury and glamour,” is “fashion-right and should contribute to Coach’s continued strong financial performance.” At about $44, Coach shares are sitting just under their 52-week high of $47.45 reached on July 2.
Tiffany, however, will likely report a meager 4 percent increase in 2004 earnings per share over 2003 and there could be a downside to 2005’s results, said J.P. Morgan Chase & Co. analyst Brian Tunick in a recent research report.
Tunick said Tiffany’s top line is being challenged internationally and domestically, with the latter hurt recently by hurricanes Charley and Frances. Internationally, margins have declined, mainly from negative same-store sales results in Japan, an important region for the company that has been underperforming.
At around $32, shares of Tiffany are down roughly 36 percent from their 52-week high of $49.45 reached on Nov. 11, 2003.
@kering_official is spinning off its stake in puma in an effort to focus on its luxury brands, the brand operator announced yesterday. “We are proud to have supported the turnaround of Puma, which now has unrivaled capabilities to take full advantage of the specific dynamics of its global markets and is poised to achieve substantial growth,” said François-Henri Pinault, Kering’s chief executive officer and chairman. Artémis will become a “long-term strategic shareholder” of Puma with a 29 percent stake. #wwdnews #wwdfashion (📷: @jilliansollazzo)
The fashion world mourns for celebrated street style photographer, Nabile Quenum, who died at age 32 in Paris.
Quenum, creator of the fashion blog “J’ai Perdu Ma Veste,” was a fashion week fixture, and regularly shot for New York magazine’s The Cut, among other outlets, and brands such as Louis Vuitton, Moncler and Adidas. He was also actively involved in the #NoFreePhotos initiative, which kicked off in the fall. Read more about Quenum in @kbsmoke's story on WWD.com. #wwdnews
@verwanggang and @maisonladuree have teamed up on a dessert collab called Vera Wang Pour Ladurée. The collection, which launched this week, features a specialty macaroon, as well as a wedding cake inspired by one of the designer’s gowns. “I could not imagine a more delicate or sophisticated creation to grace any couple’s celebration,” said Wang. #wwdfashion
“I’m Russian and I love to use all these little tricks that I got from my grandma or my mom. We didn’t have a lot of money for creams or anything like that so we would use a garden as a beauty treatment regime. We’d put cucumber in the fridge and do a cucumber mask,” says model @irinashayk on one of her beauty hacks. WWD asked celebs what their go-to self-care rituals are. See what Naomie Harris, Freida Pinto and more said on WWD.com. #wwdeye #wwdbeauty (📷: @zefashioninsider)
Exclusive: @viktorandrolf are teaming up with @Zalando on a collection made from leftover clothing. The lineup, which lands at the retailer February 1, includes 17 pieces adorned with sliced up and repurposed overstock from the retailer’s private label collection. Pictured here is a look from the collection –– see more on WWD.com. #wwdfashion #wwdnews
@duewestnyc is the newest bar joining the collection of intimate neighborhood-focused spaces in the West Village. The cocktail menu, which includes bitters and syrups made in-house, offers a “Build Your Own Old-Fashioned” – like the one pictured here – where guests can choose from a list of spirits and unexpected sugars and bitters. #wwdeye
Spotted at last night’s National Board of Review gala in NYC: Angelina Jolie. Jolie – along with Meryl Streep, @lupitanyongo and more – continued the all-black dress code from Sunday’s Golden Globes. #wwdeye (📷: @lexieblacklock)