Is the worst over for luxury stocks? - MSN Money Is the worst over for luxury stocks? - MSN Money

Wednesday, May 30, 2012

Is the worst over for luxury stocks? - MSN Money

Is the worst over for luxury stocks? - MSN Money

By James Brumley


The good part about owning luxury stocks: They fly high when investors are feeling giddy. The bad part about owning luxury stocks: Investors will dump them with extreme prejudice at just the slightest whiff of economic trouble.


Well, investors got a whiff of trouble in late March, sending shares of Michael Kors Holdings (KORS), Tiffany & Co. (TIF), Blue Nile (NILE), Ralph Lauren (RL) and a few other high-end-goods manufacturers into the proverbial gutter. It's a complete turnaround from the rally these names were doling out just a few months earlier.


Of course, what's done is done. The questions now are (1) what happened and (2) is the worst over?


What happened?

Take Tiffany & Co. To give credit where it's due, the jeweler beat top-line estimates last quarter with revenue of $819.2 million (up 7.6%); the pros were only looking for $816.5 million. Where the company crapped out was on the bottom line. Though per-share profits were up from 63 cents in the year-ago quarter to 64 cents this time around, analysts had been expecting 69 cents.


Now, although it was more than a slight shortfall, the numbers themselves weren't horrifying. In the hands of good spin doctors of a seasoned investor relations department the company might have been able to weasel out of those tepid results unscathed.

When the salt of cutting back on its forecast was poured on the wound, though, it was more than investors could handle. Tiffany dialed back its full-year profit outlook from $3.95-$4.05 per share to $3.70-$3.80, wholly under the average analyst estimate of $3.98 per share. The market punished the stock to the tune of 8%.


Were it just Tiffany & Co., the whole thing might be chalked up to a stroke of back luck. But it wasn't.


Michael Kors shares followed Fossil (FOSL) lower after Fossil reeled in its 2012 outlook. Signet Jewelers (SIG) was hand-in-hand with Tiffany earlier in the week when it walked into the lowered-guidance trap. SIG fell from $47.75 to $44.01 on Thursday when the jewelry industry noted that jewelry sales growth had fallen from 10.2% year-over-year in the third quarter to only 5.3% in the first quarter. Signet's lowered guidance didn't help either.


That's more problems than can be chalked up to mere bad luck.


Yes, Ralph Lauren managed to top its sales and per-share earnings estimates by posting numbers of $1.62 billion (up 14%) and 99 cents (up 34%), respectively. The reported numbers might even have offered a glimmer of hope for luxury apparel, even if high-end jewelry or luxury decorative items were seeing a sales slowdown.

Yet with Ralph Lauren also suggesting its wholesale business would be crimped thanks to Europe's woes, this year's overall sales growth forecast for the company was whittled down to single-digit levels -- hardly the kind of thing that keeps investors excited.


As it turns out, all the folks who were selling luxury-oriented stocks near the end of March made the right call.


Is the worst over?

In their defense, traders who rode these stocks lower since late March can at least claim they didn't know what was in store -- and the market's bearish tide didn't help either. The cat's out of the bag now, though, so what's next for these stocks? Or more directly, is the worst already baked in, and are these stocks now bargains?


Baked in? Yes. Bargains? No. A low-priced stock is only a bargain if there's a reasonable chance it could do something to move higher at some point in the foreseeable future. For the bulk of these names, the kind of slowdown we've already seen tends to last awhile and can even become self-fueling (i.e. the worse the spending gets, the less consumers want to spend). With that as the backdrop, it's unlikely we'll see many pleasant surprises form the group anytime soon, with one possible exception: Blue Nile.


Although Blue Nile offers high-end luxury jewelry, its whole shtick is better prices for the same jewelry that consumers might overpay for at a traditional jewelry store. By cutting out the middleman and selling direct to consumers via the website, Blue Nile has been carving out a decent piece of the luxury pie. Though shares still are priced at a frothy 43.9 times forward-looking earnings, sales have been reliable and profits have, well, at least consistently existed.


NILE still is a conceptual investment rather than a performance-based one, but it's the only major investment choice within the luxury goods world that looks worth a damn as we head into the slow summer months. Most everyone else seems poised to post troubled second-quarter numbers -- at a point when investors already are going to be discouraged.


As of this writing, James Brumley did not hold a position in any of the aforementioned securities.


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NYSE stocks posting largest percentage increases - Yahoo Finance

NEW YORK (AP) -- A look at the 10 biggest percentage gainers on New York Stock Exchange at 1 p.m.:

Booz Allen Hamilton Holding Corp. rose 14.0 percent to $16.96.

EnerSys Inc. rose 4.6 percent to $32.92.

VeriFone Systems Inc. rose 3.2 percent to $36.79.

Harry Winston Diamond Corp. rose 2.9 percent to $12.62.

Monsanto Co. rose 2.6 percent to $76.68.

Silvercorp Metals Inc. rose 2.5 percent to $6.11.

Greenway Medical Technologies Inc. rose 2.5 percent to $16.15.

FutureFuel Corp. rose 2.3 percent to $10.10.

Proto Labs Inc. rose 2.1 percent to $34.95.

Steinway Musical Instruments Inc. rose 2.0 percent to $22.89.

Spain scrambles to contain financial crisis -

Spain battled to contain fears of financial collapse Wednesday, scrambling to fund a major banking rescue as its debt risk premium rocketed to a euro-era record.

The interest rate on Spain's 10-year bonds shot to 6.703 percent -- unsustainable over the longer term -- as the nation fought to avoid being the next victim of the eurozone crisis.

When compared to safe German debt, investors in Spanish bonds were demanding an additional 5.39 percentage points, a premium that easily crashed through euro-era records set each day of this week.

Stock prices skidded across the world on fears Spain would need a rescue and the European single currency plunged to $1.2389 -- a low point last seen in July 2010.

Bank of Spain governor Miguel Fernandez Ordonez shook investors by announcing he would depart June 10 -- a month before his term was due to end.

The central bank chief, who said he was leaving early to give his successor time to take the reins, had sought in vain a hearing in the lower house of parliament to explain stricken lender Bankia's woes.

"Nothing is more important now than regaining confidence because without that we cannot resolve any of our problems," Ordonez told the Senate on Wednesday.

But he also said there were risks to Spain's plan to slash the public deficit from 8.9 percent of economic output last year to 5.3 percent this year and 3.0 percent in 2013.

In a recession with 24.4 percent unemployment, the state faces "downward risks" to its revenue forecasts and the threat of higher-than-expected expenses, for example for unemployment benefits, he warned.

"It is not an exaggeration to say that Spain is staking a great part of its future on achieving these fiscal targets," he said.

In Brussels, Economic Affairs Commissioner Olli Rehn said that if Spain reined in regional government deficits and presented a "solid" two-year budget, then the deficit deadline could be extended to 2014.

Spanish banks, hugely exposed to a property market that crashed in 2008, are at the heart of market concerns.

Prime Minister Mariano Rajoy's conservative government this month instructed banks to set aside 30 billion euros in 2012 in case property-related loans go bad, on top of 53.8 billion euros demanded under February reforms.

Hardest hit lender Bankia has asked the government for 19 billion euros in capital in addition to 4.465 billion euros invested by the state earlier this month to salvage its books.

But no-one seems clear about where the money will come from, especially when debt markets are charging exorbitant sums to lend to Spain.

"Some sort of attempt to rescue Spain is likely and it is likely to come in July," said Barcelona-based economist Edward Hugh.

Spain would attempt to cling on until Greek elections were over and the European Stability Mechanism, a permanent rescue fund, was operational, he predicted.

The cost of recapitalising the banks would be 150-200 billion euros, he estimated, assuming that lenders were obliged to make additional provisions for home mortgages.

"My short term feeling is that they will somehow get through the summer at least and keep on going but at any moment the whole thing could buckle," Hugh said.

Economy Minister Luis De Guindos said the state-backed Fund for Orderly Bank Restructuring (FROB) would issue bonds to raise capital, which it could then inject into Bankia.

He denied a Financial Times report which said the European Central Bank had rejected a Spanish proposal to put newly issued government bonds into Bankia, which could then use them as collateral to borrow from the ECB.

The ECB also issued a statement denying it had taken a position or been consulted on the plan.

But the government failed to quash the concerns over Spain's financial sector.

Centre-right daily El Mundo this week said three other banks, CatalunyaCaixa, NovacaixaGalicia and Banco de Valencia, could need another 30 billion euros in public funds to meet new regulations.

Yet another lender, Banco Popular, whose bonds have been downgraded to junk bond-status, said this week it was in talks to sell its Internet banking business in a scramble for cash.


Financial dictators rule United States, Canada: Analyst - Presstv

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61 percent of Canadians voted against conservatives but they are governing with vengeance and using their majority to impose all sorts of laws that are not supported by the vast majority of Canadians but they do have majority, they are governing as if they ...

Business Marketing Association Names Eduardo Conrado 2012 National Board Chairman - Yahoo Finance

NAPERVILLE, Ill., May 30, 2012 /PRNewswire/ -- The Business Marketing Association (BMA) today announced that Eduardo Conrado, senior vice president and chief marketing officer, Motorola Solutions, has been named 2012 National Board Chairman. The announcement was made at the organization's board meeting in conjunction with the BMA's annual international conference, "Grow" in Chicago, Ill. 

Conrado, a veteran marketer, leads the global team that created Motorola Solutions' strategic brand framework, including purpose, brand promise, values and voice, as well as the company's successful integrated marketing strategy. Conrado ensures there is a single, unified voice across all communications channels – from branding and marketing strategies, to product and channel marketing to global communications and interactive marketing. 

"It is an extremely exciting time to be a marketer. From measuring click-through rates in web advertising to engaging a global audience on Twitter, marketers are now able to tangibly demonstrate the value of their efforts in real time.  Beyond the tactics, marketers have a larger opportunity to play a role in the development of strategic direction for their respective organizations, and in fact, are becoming stewards for a next generation of innovation," said Conrado. "As BMA National Chair, I look forward to working across the organization to develop new networking opportunities, programs, tools and insights to support our members and drive a new cycle of innovation. "

Conrado succeeds Allen Maag, chief communications officer at Avnet, who completed his term as National Chair this month.  Maag joined Avnet as chief of communications officer in 1998 and is responsible for brand management, which includes global public relations, investor relations marketing, community relations and corporate communications.

"It has been priceless to meet so many professionals in the business-to-business marketing community and share best practices, networking and stories," said Maag. "This year our focus at BMA was on enhancing our content and communications programs, and expanding the organization globally, with our first ever sessions in Beijing and London. I am grateful for our board's efforts and the opportunity to serve as BMA National Chairman and am confident that the organization is in great hands under Eduardo's leadership to continue to grow and flourish helping marketers build their careers."

BMA works to increase the impact and value of marketing in businesses worldwide. Extending to more than 22 local chapters, the organization has grown its membership base and is now one of the largest communities of business-to-business (B2B) marketing professionals.

For more information on the BMA and its programs, please visit:

About the Business Marketing Association

Started in 1922, today's Business Marketing Association (BMA) works to increase the importance, impact and value of marketing in businesses worldwide.  BMA is the only professional organization with an exclusive focus on business-to-business marketing and its key drivers: customer engagement and relationships, product and service innovation, value pricing, channels, online/offline marketing communications and analytics. BMA's members represent state-of-the art expertise in business-to-business marketing and communications, and share best practices for the benefit of the global business community. For more information visit or phone 630-544-5054. E-mail

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