Market Watch: Puma’s Overhaul… Kate Spade on Deck

The Week Ahead

Tuesday, May 13:
Salvatore Ferragamo SpA Q1 results
U.S. retail sales for April
U.S. business inventories for March

Wednesday, May 14:
Puma SE Q1 results
Kate Spade & Co. Q1 results
Macy’s Inc. Q1 results
U.S. productivity for Q1
U.S. unit labor costs for Q1

Thursday, May 15:
J.C. Penney Co. Q1 results
Kohl’s Corp. Q1 results
Nordstrom Inc. Q1 results
U.S. consumer price index for April
U.S. initial weekly jobless claims
U.S. continuing weekly jobless claims

Stock Watch

Investors will be looking for signs of a turnaround at Puma SE after the company reported a wider fourth-quarter loss on the back of lower sales and one-time charges for 2013.

Puma is forecasting net sales to be flat in 2014 and is guiding for an improvement in net profit margin this year, which it expects will be roughly 3 percent of net sales, up from 0.2 percent in 2013.

Analysts expect Puma will report diluted earnings per share of
2.49 euros, or $3.43 at constant exchange, for the period. The consensus forecast for sales is 739.9 million euros, or $1 billion.

Also set to report this week is New York-based Kate Spade & Co., which is expected to report a 4 cent-per-share loss for the first quarter, a 75 percent improvement over the prior corresponding period, according to analysts polled by Yahoo Finance.

Revenue is expected to fall 46 percent to $201.9 million due to the discontinuation of three brands following Fifth & Pacific’s transformation to Kate Spade.

“Earnings for the Kate Spade brand have been pressured by supporting other brands in the former Fifth & Pacific [and] Liz Claiborne portfolio, as well as increased investments into the Kate Spade brand, which we believe have now positioned it well for growth,” said Barclays Equity Research analyst Joan Payson.

“These include investments made to develop the highly impressive e-commerce platform, expand the still relatively small store network, launch new brands such as Saturday and Jack Spade, and acquire regional licenses,” she said, noting that the company could steal market share from luxury rivals Michael Kors Holdings Ltd. and Coach Inc.

Today, Michael Kors announced Cathy Marie Robinson has been appointed SVP of global operations as the firm grows its overseas business.

 “[Marie’s] significant experience managing global supply chain operations for large retail distribution networks, both brick-and-mortar and online, will be instrumental to us as we develop a world-class distribution network to meet the growing demand for our brand,“ said Chairman and CEO John Idol.

Closing the week are earnings updates from J.C. Penney Co.,
Kohl’s Corp. and Nordstrom Inc., with all three expected to report signs of a recovery in the retail sector after choppy conditions over the winter. 

But market watchers said the impact of weakness in first-quarter earnings could be reduced if full-year guidance is reiterated.

“Disruptive weather trends and a late Easter pressurized consumer spending in February and March, [and] as weather normalized in April trends improved, but likely not enough to save the quarter,” said Morgan Stanley analyst Kimberly Greenberger.

Elsewhere, DSW Inc. today announced the completion of its initial acquisition of Canada-based Town Shoes Ltd. for 755 million Canadian dollars, or $68.7 million at constant currency rates.

DSW acquired a 49.2 percent interest from clients of Alberta Investment Management Corp. and other minority shareholders. The stake provides DSW with 50 percent voting control and board representation equal to the primary remaining shareholder, Callisto Capital.

DSW shares were 3.2 percent, or $1.07 higher, at $34.37 in midday trading.

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