Fashion resiliance against pricey raw materials

Wednesday, 23 February 2011
Fashion industry is showing a covetable resilience to soaring oil and other raw materials’ prices, as proved FashionUnited Top 100 Index, which closed Tuesday up to 1,265.45, rising by 6.06 points.

U.K. retailer Next was lifted to buy from neutral on Tuesday at UBS, which said the stock is less risky than most apparel stocks, with a stronger balance sheet and better valuation. Many apparel shares have been hit hard this year, owing to domestic demand pressures and rising input costs. UBS reduced its U.K.-clothing-retailer gross margin by a further half-percentage point owing to the potential higher impact of higher cotton prices on sales and margins. UBS said it's too soon to be positive on the European retail sector due to a cautious outlook for consumer demand. However, this encouraging recommendation transformed into a humble +0.15% in the stock exchange.

Crossing the Pond, Macy’s posted a jump in fourth quarter earnings today following strong holiday sales. Net income rose to $667 million, or $1.55 per share, compared to $445 million, or $1.05 per share, in the same quarter last year. Adjusted earnings of $1.59 per share beat analyst estimates. Net sales were just shy of analyst expectations, up 5.4% to $8.27 billion, on same-store sales growth of 4.3%. Luxury department store said it is looking for earnings of $2.25 to $2.30 per share in 2011, ahead of expectations on the high end. Shares are trading higher on the news, picking up 0.4% this morning.

On the contrary, VF Corporation reported a decline in fourth quarter earnings yesterday, to $54.2 million, or $0.49 per share, compared to $66.9 million, or $0.60 per share, in the same quarter last year. Revenue grew 11%, to $2.12 billion. VF said adjusted earnings rose to $1.78 per share, ahead of analyst expectations. The company’s 2011 forecast of earnings per share of $7 to $7.10 on revenue growth of 8-9% beats Wall Street estimates and has shares trading higher by nearly 10%. Besides, VF was the best value within the Fu Top 100 with a final gain of 8.04%.

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