Retail diaries: Global retail databook – Sept
After months of weakness,metrics start to improve;Correction in luxury multiples
October 11, 2012
Turnaround of trends in August as retail sales and CCI increase
After showing weakness for the last few months, retail metrics began toshow some improvement, with Hong Kong, Australia, Japan and Germanyall seeing y-y growth momentum recover in August and the US continuedits strength. On Consumer Confidence Index (CCI) as well, the trend wasmostly rising. We also saw a momentum rebound in Swiss watch exportvalue; however, absolute value term continues to decline. Travel data(PRK & ASK) showed improvement across all regions except Africa. In anutshell, we think it is too early to say a sustained recovery is in the works;however retail health is looking better after the last few weak months.
Which have been the best performers? Which have underperformed?
The retail subsector’s performance was mixed in Sept. Luggage continuedas the best performer, followed by OEM. Luxury corrected and Chinabranded retail was the worst-performing subsector. In terms of individualstocks, Michael Kors and GAP top the YTD list, while Anta and VIP led thepack last month. Inditex saw the most positive EPS upgrades from thestreet.
Organic growth and SSSG trend: Broadly in line with our estimates
Prada's 2Q12 continued to have strong SSSG, but slowed a bit in Italy andNorth America. The outlook was also cautious, in line with other luxurynames. Otherwise, the luxury earnings season was mixed; mid-marketretailers (eg, GAP, H&M, Inditex) mostly beat the market’s expectation,while cosmetics names were in line. Chinese retailers delivered mostly inline results.
Samsonite is our top pick, but keep tabs on luxury
Although Samsonite (Buy) is up 30% since its recent trough in July, webelieve potential upside still remains, led by its sharp discount to Tumi andstrong fundamentals. Regarding Li&Fung, we don’t expect many near-termcatalysts, thus we maintain our Neutral. Esprit's 2H12 results showed itspoor performance might not only come from transformation spending butalso weaker sales momentum. We maintain our Neutral due to a lack of catalysts. Correction in valuation for luxury likely makes a case for entrypoints, but Prada is still trading rich vs our cautious outlook on sector.
London again takes the crown of Global Fashion Capital in 2012
The combination of Kate Middleton and the Summer Olympics helpedLondon retain its crown as the top Global Fashion Capital in 2012,followed by New York, Barcelona, Paris and Madrid.
Cautious in the short term on China-branded retailers
We are cautious on retailers’ short-term performance and expect weak3Q12 data to be released. We believe China retail sales may improve in4Q12, benefiting from FAI growth acceleration and last year’s low base.
Retail diaries - The monthlyglobal retail databook. In thisdata-centric retail diariesmonthly, we keep track of global datapoints on retail,consumer health, valuations,price performance, relativecomparisons, news flow,company events.
Research analystsHong Kong RetailTanuj Shori - NIHK
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Sarah Xing - NIHK
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Vivien Hu - NIHK
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Vishnuvardana Reddy - NSFSPL
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