Nike owns trading session

Thursday, 23 December 2010

Despite European frozen markets and US turmoil around Nike and American Apparel, international apparel market closed the session in positive soil. FashionUnited Top 100 Index ended up by 12.98, reaching the 1,278.68 by the market close.

The market size of the U.S. apparel industry is estimated to have declined by around 5% in 2009, compared to 2008. This can largely be attributed to falling consumer spending, especially in the upper income and teen demographics, as well as weak personal disposable income levels over the past few quarters. These factors could pressure Gap Stores sales, which would ultimately impact its EBITDA margin.

As published in the report ‘Global Apparel Markets: 3rd Quarter Business Review’ by Marketpublishers, clothing market in Europe is forecast to grow by 2.5% per annum between 2009 and 2014, from US$217 bn to US$245 bn. The global radio frequency identification (RFID) market is forecast to be worth US$5.63 bn in 2010 while demand for RFID tags for use in apparel in the retail sector is expected to reach 300 mn in the same year. In the first half of 2010, China’s clothing exports increased by 16.2% and US clothing imports rose by 8.4% but EU clothing imports declined by 3.9%.

But Wednesday all were looking to the world’s largest sportswear manufacturer. Nike said its net income for the period ended Nov. 30 rose to $457 million from $375 million in the same quarter the previous year. Earnings per share spiked 24 percent to 94 cents.Apparel remained the top seller among categories in the North American market, growing 22 percent. Revenues in China increased 20 percent, driven by a 26 percent rise in sales of footwear. Regionally speaking, emerging markets grew 24 percent and contributed $755 million, nearly half of all the revenues in North America. Revenues declined in Japan by a total of 14 percent, and in Western Europe by 7 percent.

However, the S&P 500's worst performers yesterday included Nike that was trading around -5.83% from the previous close. Shares of Nike topped expectations on Tuesday, reporting a 22 percent jump in income for the second quarter and awaking investors hunger for apparel stocks.

Some analysts have highly recommend the purchase of Nike’s shares, as its increased 10 percent to $4.8 billion, while net income rose 22% over the past quarter and earnings per share came in at 94 cents per share. (6 cents higher than expectations). The stock has been on a good run with shares up nearly 40% this year. Shares of Nike surged to a new 52 week high of $92.49 Tuesday. Shares are down because analysts wanted to see 12 to 13% growth in future orders. The one concern for Nike is that margins may be squeezed in the future due to higher input costs.

Another company in the spotlight was American Apparel, as it shares fell 8.5% to $1.51 after the company said that its audit committee is investigating assertions by Deloitte & Touche LLP that management withheld financial statements. Troubled clothing company disagrees with its former auditor's claim that it withheld its February financials. American Apparel said in a filing with the Securities and Exchange Commission on Tuesday that it did not believe the February financials were withheld. The Los Angeles-based company's current auditor, Marcum, is performing a re-audit. American Apparel said it doesn't believe the re-audit will result in any changes to its 2009 financials, although it couldn't assure that this would hold true.

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