Burberry wins placate Guess concerns

Thursday, 24 May 2012

Markets closed mixed on Wednesday, truly cheered by Burberry´s 24% rise in profit yet having been warned after Guess Inc. reported first consecutive drop in annual profit in eight years. Analysts have pointed out how the fashion forward brand might be subject to a takeover bid soon.

 
In a hard session that it´s far from celebrating the company´s 30th anniversary, Guess Inc. reported total net revenue for the first quarter of fiscal 2013 decreased 2.2 % to $579.3 million (Rs 3,261.68 crores) from $592.2 million (Rs 3,334.32 crores) in the prior-year quarter. 

As highlighted by Bloomberg, “Guess Inc. is turning into the cheapest takeover candidate in the fashion industry.”
 
Facing its first consecutive drop in annual profit in eight years, and after sinking to an almost three-year low on Wednesday, the retailer was valued at 3.5 times earnings before interest, taxes, depreciation and amortization, according to data compiled by Bloomberg.  Jefferies Group Inc. and Morningstar Inc. say the retailer may still entice leveraged buyout firms. Guess has a higher free cash flow yield than 97 percent of its rivals, the data show. It also holds a half-billion dollars in cash, has almost no debt and owns a globally recognized brand name that is driving growth in markets such as China.
 
Guess stores in North America generated revenue of $251.8 million (Rs 1,417.73 crores) in the first quarter of fiscal 2013, adding a 1.8% increase from the $247.5 million (Rs 1,393.52crores) registered a year ago. Comparable store sales decreased 5.5% in dollars and 5.1% in local currency. Net revenue from the European segment decreased 9.7% to $189.8 million (Rs 1,068.65 crores), compared to the $210.2 million (Rs 1,183.51 crores) gained in the prior-year period. In local currency, net revenue decreased 4.6%. In contrast, Asian market pushed revenue up by 7.9 % to $64.8 million (Rs 364.85 crores) from $60.1 million (Rs 338.37 crores). Net revenue from North American wholesale division decreased 3.8 % to $43.9 million (Rs 247.17 crores) from $45.6 million (Rs 256.74 crores) twelve months ago.  Licensing segment net revenue increased to $28.9 million (Rs 162.72 crores) from $28.8 million (Rs 162.15 crores).
 
On the other side of the traded apparel companies’ board it was Burberry. The British high-end retailer celebrated a 24% jump in annual profits thanks to its new focus on menswear. Tailoring and enhanced ranges drove a 26% rise in menswear sales, while non-clothing such as bags, small leather goods and accessories lifted 50%.
 
Burberry's total revenues were up 24% to £1.9 billion ($2.99billion or Rs16,828.28 crores) in the year to March 31 and pre-tax profits lifted to £366 million ($ 575.74  million or Rs 3,241.66 crores) as key Asian markets showed more strong growth and flagship stores in London and Paris performed well.
 
Richard Hunter, head of equities at Hargreaves Lansdown stockbrokers, described the annual results performance as robust, reported Associated Press. He added: "A 24% rise in pre-tax profits defies some of the economic gloom, whilst the company's exposure to some strong local markets continues to propel prospects."
 
Finally, good news as well for American Eagle Outfitters, which saw 43% increase.  Company’s net sales grew by 18 per cent to $719 million (Rs 4,048.25 crores), compared to $610 million (Rs 3,434.54 crores) last year. Adjusted earnings for the quarter were $0.22 per (Rs 12.38)diluted share, which excludes the operating results for 77kids, compared to adjusted earnings of $0.16 per(Rs 9.00) diluted share previous year, explained the American retailer in a statement.

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