maartenp : outperform
[I-bank focus] Macquarie ups Esprit (00330) to "outperform"
Macquaire upgraded Esprit (00330) to "outperform"
from "neutral", but lowered its target price to HK$27.6 from HK$38.
The house cited recent brand research by the WPP Group (June 2011) suggesting that
Esprit was the 5th best brand in the world after Nike, H&M, Zara and Ralph Lauren. While
this survey also shows that Esprit's brand momentum has declined, Macquarie thinks that
Esprit still may have enough mindshare to rectify its brand image.
Macquarie said Esprit is still "value brand", but its pricing (a 30-40% premium to H&M
and Zara) works against it with customers still trying to scale down spending and Esprit
not being as fashion forward as its peers.
Macquarie cut its 2011 and 2012 EPS by 11% and 14%, driven by higher restructuring costs
from store closures, which the research house believes will impact margins in 2H, and also
still sluggish revenue growth. (KL)