Market Report: Luxury is starting to look shabby
Wednesday 05 September 2012
Is luxury losing its lustre? Some City scribblers certainly think so. The shears were out yesterday for LVMH, Coach, Mulberry, Hugo Boss and Burberry. After a good run for the shares this year, the outlook is now uncertain. No immediate signs of stimulus from China, a mixed picture in the US and a depressed Europe are hitting the outlook for luxury players.
Scribes at Barclays warn that Permira-owned Hugo Boss could be high-risk, while brands with lots of shops that sell leather goods and have a limited exposure to European shoppers will fare better. Barclays downgraded handbag brand Mulberry's price target from 1930p to 1600p and British success story Burberry from over to equal weight, reducing the target from 1950p to 1600p.
Mulberry edged up 15p to 1345p while Burberry retreated 40p to 1315p.
HSBC experts think that now Chinese consumers do more of their luxury shopping overseas, pressure will pile up on those with too many shops in the country. Some established brands in Asia may lose market share – what HSBC scribblers call "first-mover disadvantage."
Swiss-based Cartier-to-Mont Blanc owner Richemont will today update the market with its August trading figures.
The pressure is on for the boss of Land Securities, the UK's largest property company. Rob Noel, chief executive for six months, has seen the stock downgraded by four analysts in two weeks.
The retail-to-office property group lost 16p to 777.5p yesterday as scribes from UBS, JPMorgan Chase and Exane BNP Paribas downgraded the Real Estate Investment Trust (REIT) stock to neutral. Property doyen Mike Prew at analyst Jefferies last month cut his recommendation on the stock to hold from buy.
British Land, the UK's second-largest property company, was also downgraded and its shares shed 14.5p to 527p.Unlike rival Hammerson, Land Securities and British Land have not narrowed their focus to one property sector, and remain property "generalists".
Analysts reckon the real-estate sector is looking less attractive after its recent strong performance, and Mr Noel will have to pull something out of the bag to get them to change their view.
A profitable exit for the UK taxpayer from Royal Bank of Scotland is an ever-more distant dream. Investec analyst and banking guru Ian Gordon has taken his scissors to the majority state-owned bank, downgrading the stock to hold from buy, and trimmed the share price target to 245p from 300p.
Mr Gordon, who is largely bullish on banks, thinks RBS's recent 20 per cent four-week rally is a cause for concern. Its shares slid 5.8p to 220.7p.
On a bad day for the FTSE 100, investors were jittery after Moody's cut its outlook on the European Union's credit rating to negative. The index slumped 86.4 points to 5672, losing the previous day's gains.
With the deadline for the merger between commodities giant Glencore (down 3.05p to 385.1p) and Xstrata (off 29.7p at 917.5p) on Friday, the deal looked ever more unlikely.
Software group Sage, a riser for the past two sessions following rumours of bidder interest re-emerging, fell back after a downgrade from Exane BNP Paribas. The shares edged back 3.2p to 300.3p.
Midcap equipment-rental group Ashtead raised its profits guidance, and its shares jumped 33.4p to 315.9p. Seymour Pierce raised its price target for the stock to 350p from 320p, rating it a buy. The shares have already moved up more than 40 per cent in the past year.
It was another bad day for financier Nat Rothschild's and Samin Tan's Bumi. The Indonesian coal miner has been hit by falling coal prices, a board bust-up and debt worries, and things appear to be getting worse as it fell another 15.2p to 288p.
As actress Bette Davis' character said in All About Eve, "Fasten your seat belts. It's going to be a bumpy night." Well, it was for shareholders in Aim-listed Africa-focused Chariot Oil & Gas yesterday. When the shares plummeted yesterday, the company had to admit results from drilling the Kabeljou exploration well on the Nimrod prospect "are not yet known". It will update the market when it can. The shares closed down 21p at 100.25p.
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