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Director’s Cut
China consumption driving Coach
For years many of the world’s companies looked to the US consumer for growth,
but that mindset has changed as the GFC and falling house prices have cut US
spending. Now companies are increasingly looking to emerging markets
consumers, particularly those in Asia, and these trends are evident in Liz
Dunn’s initiation on 11 US softline and department store stocks.
Liz says Asia is the most exciting growth opportunity in the global clothing and
footwear market because it’s growing so rapidly, driven by the emergence of
China as a consumer economy. According to AM Mindpower, China is expected
to almost double its share of this market over the next 5 years, to almost 20%
while the US share is expected to decline from 20% to 16%.
As a result, Liz likes companies in the softlines space with good brands and
global aspirations, such as Coach (COH US) and Abercrombie & Fitch (ANF
US), which are both rated Outperform. These companies are also approaching
the point in the investment cycle where sales are accelerating, while spending is
beginning to decline, which will boost margins and earnings growth. One softline
Liz doesn’t like is Urban Outfitters (URBN US), due to decelerating sales and
margin trends, and a lower investment in international growth opportunities.
In the mature department store space, Liz favours companies with rising market
share and free cash flow utilisation. Her top pick in the space is Macy’s (M US),
which is gaining share though an integrated, customer-centric omnichannel
approach. She also sees Nordstrom (JWN US) as a long term winner as it is
investing for growth and prior investments have led to higher productivity,
margins, and returns than other department stores
Highlights
Graeme Train sees downside risk to iron ore prices in short term, but prices
can rebound given the low level of inventory cover.
Kylie Huang has done a double upgrade on Foxconn (2038 HK), as she
expects a strong turnaround due to favourable industry trends.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Director’s Cut
China consumption driving Coach
For years many of the world’s companies looked to the US consumer for growth,
but that mindset has changed as the GFC and falling house prices have cut US
spending. Now companies are increasingly looking to emerging markets
consumers, particularly those in Asia, and these trends are evident in Liz
Dunn’s initiation on 11 US softline and department store stocks.
Liz says Asia is the most exciting growth opportunity in the global clothing and
footwear market because it’s growing so rapidly, driven by the emergence of
China as a consumer economy. According to AM Mindpower, China is expected
to almost double its share of this market over the next 5 years, to almost 20%
while the US share is expected to decline from 20% to 16%.
As a result, Liz likes companies in the softlines space with good brands and
global aspirations, such as Coach (COH US) and Abercrombie & Fitch (ANF
US), which are both rated Outperform. These companies are also approaching
the point in the investment cycle where sales are accelerating, while spending is
beginning to decline, which will boost margins and earnings growth. One softline
Liz doesn’t like is Urban Outfitters (URBN US), due to decelerating sales and
margin trends, and a lower investment in international growth opportunities.
In the mature department store space, Liz favours companies with rising market
share and free cash flow utilisation. Her top pick in the space is Macy’s (M US),
which is gaining share though an integrated, customer-centric omnichannel
approach. She also sees Nordstrom (JWN US) as a long term winner as it is
investing for growth and prior investments have led to higher productivity,
margins, and returns than other department stores
Highlights
Graeme Train sees downside risk to iron ore prices in short term, but prices
can rebound given the low level of inventory cover.
Kylie Huang has done a double upgrade on Foxconn (2038 HK), as she
expects a strong turnaround due to favourable industry trends.
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