European markets see rally stopped on weak H&M´s Q1

Friday, 28 March 2014

European equities edged higher on Thursday, lifted by a rise in telecoms equipment maker Alcatel and oil group Total which were both boosted by new Chinese deals. However, European markets were set to a harsh kick of the day, with European shares halting their recovery rally after Hennes & Mauritz fell on lower-than-expected quarterly profits.

Shares in the world's second biggest fashion retailer fell 3.1 percent after posting results well short of average analyst forecasts. "H&M is quite a volatile stock on earnings announcements, so you can't necessarily read from that company to the wider market. But we haven't seen many upgrades so far in Europe (in 2014)," said Veronika Pechlaner from Ashburton Investments, adding that stocks may struggle to rise without strong earnings as valuations look full.

On a positive note, Gianni Versace closed 2013 in good shape, with revenues coming in at 479.2 million euro, an increase of 17.2 percent. EBITDA, due to currency fluctuations, increased 59.7 percent to euro 71 million euro, which accounted for 14.8 percent of total revenues. Net profit grew 27.6 percent to 10.9 million euro, compared to 8.5 million euro in 2012.

Meanwhile, in the US, stocks ended mostly flat, with the Dow Jones Industrial Average down just five points and the S&P 500 dropped 0.2 percent. The Nasdaq lost 0.5 percent.

Among main movers was Lululemon Athletica (NASDAQ: LULU ), which closed the session up 6.2 percent after its fourth-quarter earnings report beat lowered expectations. Earnings at Lululemon remained flat at 0.75 dollars a share, but still over the 0.72 dollars consensus estimate. Sales also topped expectations, coming in at 621 million dollars Vs. the 615 million dollars forecasted by market.

However, Lululemon's guidance was not an encouraging one for investors, as the atheletic apparel retailer expects a decline in earnings per share (EPS) in 2014 to 1.80-1.90 dollars, below estimates at 2.14 dollars.

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