Geox defies Italian struggle with 4% rise

Wednesday, 09 November 2011

Jones Apparel, Maidenform Brands and Polo ralph Lauren topped the listed apparel companies charter in Wall Street. In Europe, Italian shoemaker Geox announced a sales rise of 4% in its third quarter.

Jones Apparel became one of yesterday's biggest movers at Wall Street, down 3.5% to $11.70. The Dow Jones Industrial Average was trading 0.3% lower to 12,032 and the S&P was trading fractionally lower to 1,259. Potential upside of 23.1% exists for Jones Apparel, reports Financial News Network (FNN), based on a current level of $11.70 and analysts' average consensus price target of $14.40. The stock should find resistance at its 200-day moving average (MA) of $11.88, as well as support at its 50-day MA of $10.75. Jones Apparel share prices have moved between a 52-week high of $16.02 and a 52-week low of $8.00 and are now trading 46% above that low price at $11.70 per share. In the last five trading sessions, the 50-day moving average (MA) has climbed 1.1% while the 200-day MA has remained constant.

At FNN they also point out that Maidenform Brands has overhead space with shares priced $25.96, or 23.1% below the average consensus analyst price target of $33.75. Maidenform Brands shares should encounter resistance at the 200-day moving average (MA) of $26.55 and support at the 50-day MA of $24.05.

The third stock in the limelight in America was Polo Ralph Lauren Corp, which fiscal 2012 second-quarter earnings surged 17.7% to $2.46 per share from $2.09 in the year-ago period, primarily driven by strong growth in net revenues. Quarterly earnings also surpassed the Zacks Consensus Estimate of $2.24 per share. Polo Ralph’s gross profit in the quarter jumped 21.0% year over year to $1,078.6 million. On the contrary, gross margin contracted by 140 basis points to 56.6%. The decline in gross margin was mainly due to increased cost of goods sold partially offset by better geographic and channel mix and increased pricing in selected items.

Meanwhile, Italian footwear maker Geox announced third-quarter results that were even with internal as well as market expectations. Sales rose 4% from the prior-year period and the company confirmed guidance for the full year. A mid-single-digit sales increase and confirmation of guidance might seem unexciting, but with the backdrop of financial uncertainty in Italy and Europe in general, analysts have to call the situation somewhat encouraging. “We also take a positive view of the announcement of the evolution of the distribution strategy to flow product on a more even basis throughout the season, which we believe should have positive implications for sales and cash flows. We are placing the shares under review as we assess our long-term cash flow and valuation assumptions under a wider range of economic outcomes, particularly in Geox's core markets,” highlight analysts at Morningstar. “We are placing Geox under review as we assess some of our long-term assumptions, such as the growth of franchise stores and the increasing mix shift toward apparel, and the ability to hold gross margins. In our assessment, apparel generally has strong gross margins but greater fashion and markdown risk. The company is probably facing a tough 2012 and 2013, given the European economic outlook and credit crisis, which we believe will constrain consumer spending” they added in a note to investors on Wednesday.

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