Speculations on Burberry heighten markets

Thursday, 07 October 2010

Wednesday’s FashionUnited Top100 Index rose by 2.5 to 1150.79 points, closely followed by the main index in China, which closed at 1,117.91. In USA, Dow Jones reached the 1078.80 height.

Quintessentially British house Burberry Group is speculated to be taken over by a private equity group and rumors have turned into late shares acquisition movements by minor stakeholders. This bonanza lasted just a few days, until yesterday when Citigroup poured cold water over the British label managers assuring that their recent sales success is based on unfounded investor interest. “We do not see much strategic and financial rationale for private equity money to enter so late in Burberry's transformation story”, Citigroup tells the Financial Times. “Likewise, we struggle to find strategic rationale for [French luxury goods group] PPR and LVMH to add another soft luxury brand to their portfolio”, added.

Also in Great Britain, M&S recovered the points they lost from Monday, when their new boss effectively took over the post. The family founded retailer gained 1.4 points by the end of the trading day.

On the other side of the Atlantic, Children's apparel retailer Gymboree has hired Goldman Sachs to begin a formal auction of the company that is expected to fetch more than $1 billion, according to the New York Post. The seek for a new main partner who brings financial aid has been shaking the market for the whole summer, affecting not only the Gymboree’s stocks, but also its principal competitor, Chico’s. It also counted for The Children’s Place Retail, which noted a drop of 2.47% yesterday.

In the meanwhile and after months of speculations and quotes juggling, American Apparel's lenders at Lion Capital have agreed to alter the terms of their agreement with the retailer so that they do not have to file bankruptcy. Lion Capital partner Lyndon Lea remains upbeat about investing in a company that's had such highly public difficulty paying off its debts. “Lion Capital has enormous admiration for both American Apparel and its founder, Dov Charney”, resumed Lea, who also unveiled that “we are working together with Dov to realign the capital structure of American Apparel to support a number of key initiatives within the business, including the hiring of several new senior executives”. In the meanwhile, American Apparel CEO Charney continues to defend his position, taking the fact of their stocks rose lightly on Friday thanks to this deal.

However, not everything is solved for the dance-inspired clothing brand, as they must turn a pre-tax profit of $20 million over the 12 months ending January 31, and by September 2013 must rake in $80 million. Other American value suffering yesterday was Fossil. The accessories brand lost 1.04 points as opposed to the majority of US based companies gathered within the FashionUnited Top 100 that slowly moved up and down but not overcoming the 0.5 points variation.

Finally, Asian stocks rose sharply after the Bank of Japan's easing moves spurred hopes of a new round of global central bank action.

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