Market expectant about Nike, Ann and Billabong

Thursday, 20 December 2012

Trefis analysts issued a note earlier this week explaining why they think Ann Taylor is fairly valued at 36 dollars per share. “Ann 's ( ANN ) stock has increased significantly since August 2012 following the company's announcement of its improved outlook for fiscal 2012. The retailer's brands such as Ann Taylor and LOFT enjoy strong brand recognition in the U.S. It operates over 700 stores in the U.S. and a healthy e-commerce channel. Moreover, its factory stores provide a viable alternative for budget conscious customers. Apart from strong brand recognition, Ann also focuses on being responsive to frequently changing fashion trends. Our price estimate of 36 dollars for the company stands at a premium of about 10 percent to the market price.”

“But while Ann seems to be doing well in most areas of its business, there are some risks that can potentially weigh on its growth. These include relatively higher pricing and fewer promotional activities compared to its rivals such as Abercrombie & Fitch ( ANF ) and Gap (GPS),” they warned.

Elsewhere, Oregon´s Gov. John Kitzhaber and athletic-wear giant Nike Inc. agreed Wednesday to a 30-year deal that promises Nike will only be taxed on its in-state sales. Nike requested the deal while it plans a 150 million dollars expansion and 500 or more jobs. "We appreciate Gov. Kitzhaber's leadership and the Oregon Legislature's support," said Nike CEO Mark Parker. "Our roots are here in Oregon, and over the last 40 years we've grown from a small company to a global one connecting with consumers in markets all around the world." Nike told the state it would only pledge to expand if the so-called "single sales factor" tax benefit remains in place, a calculation favorable to the global apparel giant. The guarantee means Nike won't later be taxed on its payroll expenses if it hires hundreds more workers.


Nike is projected to report second-quarter earnings of 1 dollar a share on Thursday, according to a consensus survey by FactSet. “We expect a mainly in-line quarter with the potential for slight upside as NKE historically beats estimates. That said, we expect somewhat choppy futures trends as strength in North America, Latin America and Central and Eastern Europe is offset by softness in Western Europe and pressure in China,” said Christopher Svezia, an analyst at Susquehanna International Group.

“Compared to the overall growth of Nike, growth in Europe (specifically Western Europe) has been extremely slow. Nike’s overall growth figures the past three quarters have been 11 percent, 16 percent and 21 percent, respectively. Western Europe’s last three quarters have been –5 percent, 4 percent and 7 percent, respectively. The numbers demonstrate that Europe has been dragging Nike’s overall global median growth down quite significantly. Many experts have attributed Europe’s low figures to a weak economy,” Forbes analysis team wrote Wednesday.

Finally, Billabong shares climbed 4.8 percent to 98 Australian cents Wednesday before being suspended, after the Australian Financial Review reported on Naude’s offer. The company cited “a possible change of control proposal” as reason for the suspension in a filing today, without identifying the bidder.

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