Luxury's joy: posting profits and dividends

Wednesday, 18 May 2011

Luxury retail shares attracted a good number of large
investors, who buoyed by a flurry of upbeat blue chip earnings news. Trailing these news, the FashionUnited Top 100 Index was still downing Wednesday, but cutting the drop as it finally closed at 1331.88, compared to the previous day’s 1348.71.
In the UK, ex-dividend factors also pushed Homebase operator Home Retail Group down, off 11.6p at 211.4p, while luxury brand Burberry eased 8.5p at 1,329.5p. Crossing the Mancha Channel, LVMH held its General Asembly on March 31, 2011, and approved the payment of a dividend for financial year 2010 of 2.10 Euro per share. Taking into account the 0.70 Euro paid on December 2, 2010, the balance of 1.40 Euro will be paid on May 25, 2011. The last trading day with dividend rights is May 19, 2011. Still within the luxury firms niche, Luxottica Group has announced total net sales of €1,556.1 million in the first quarter of 2011, a solid +11.8% rise (+9.2% at constant exchange rates) over the same period in 2010.

Operating performance for the first quarter confirmed the increasing profitability trend with a more than proportional growth as compared with net sales. The Italian group’s EBITDA for the first quarter of 2011 rose by +16.6% over the same period of 2010, reaching €283.0 million. EBITDA margin was therefore up from the 17.4% recorded for the first quarter of 2010 to 18.2% for the first quarter of 2011.

Operating income for the first quarter of 2011 amounted to €207.4 million, growing by +21.1% compared with the same period of 2010, which also included a large gain in Australia. Group operating margin grew to 13.3% from 12.3% posted for the first quarter of 2010 (+150bps net of the above mentioned gain). Net income for the period increased to €114.7 million, +20.6% over the €95.1 million recorded for the first quarter of 2010, corresponding to an Earnings Per Share (EPS) of €0.25. Across The Pond, Saks Inc., led the early hours in Wall Street, after saying Tuesday that its first-quarter net income rose 51 percent from a year ago, and said the results signal the return of luxury spending. Saks said it earned $28.4 million, or 16 cents per share, up from $18.8 million, or 11 cents per share, in 2010's first quarter. "We are increasingly optimistic about the future," CEO Stephen Sadove said in a statement. But revenue rose more slowly, by 9 percent, to $726 million, which could indicate that much of the rise in net income improvement came from cutting costs and closing less profitable stores.
And last but not least, Abercrombie & Fitch Co. announced Wednesday that it turned a profit in the first quarter thanks to a 22% increase in net sales, mainly driven by strong international growth.
The apparel retailer, which also owns Hollister Co., reported net income of $25.1 million, or $0.28 per share, for the first quarter ending April 30, compared to the year-ago period's loss of $11.8 million, or $0.13 per share. Nearly $800,000 of net income was derived from the company's discontinued operations. Abercrombie recorded high net revenue of $836.7 million, compared to $697.8 million the year before. Sales in the US increased 13% to $641 million, while international sales jumped 64% to $195.7 million. Online sales alone netted $105.8 million, a year-over-year increase of 32%.

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