Business | Investment
US fashion brands move abroad as foreign shoppers buoy profits
US fashion brands will open more stores abroad this year and next, encouraged by a wave of foreign shoppers that has buoyed profits at home.
- Reuters
- Published: 23:47 August 23, 2008
New York: US fashion brands will open more stores abroad this year and next, encouraged by a wave of foreign shoppers that has buoyed profits at home.
With reinforced brand recognition, they may be in a better position than some rivals even if a stronger US dollar, weakening European economy and rising air fares stem the flow of tourists to their home turf, investors and executives said.
"If they don't come [to the US], maybe they'll shop in the stores over in Europe," said Daniel Coleman, chief investment officer of Edge Asset Management in Seattle, a unit of Principal Global Investors.
US brands with stores abroad, such as Tiffany, Coach, Polo Ralph Lauren, Guess and Urban Outfitters, already tend to outperform competitors with only US stores.
"What I like about Tiffany is that they're all over the world," said Coleman, who has owned Tiffany shares in the Principal Mid-Cap Stock Fund he manages for about three years.
As of January 31, 2007, Tiffany was operating 70 US stores and 114 internationally. It is planning to open 24 stores this year across the US, Asia-Pacific region and Europe.
Urban Outfitters, which has 14 stores in England, Ireland, Scotland, Denmark, Sweden and Belgium, sees Europe as a "tremendous source of expansion," according to its Chief Financial Officer John Kyees.
"For us, Europe is just a wonderful market that we think we can have 50, or probably 100 stores in between Urban [Outfitters] and Anthropologie," Kyees said, referring to the namesake teen apparel chain and its upscale sister chain.
"But not necessarily as a replacement to the US market, or substitution, because the US market is still very good to us," he said in an interview.
Kyees said Urban Outfitters is opening five stores in Europe this year and plans to open about 50 to 55 stores next year in North America and Europe across all its concepts, which also include Free People and Terrain.
"These brands have global appeal," said Needham and Co retail analyst Christine Chen about US labels like Polo, Coach, and Calvin Klein. "The ironic thing is that Europe may hate our politics but they love our brands."
Polo, Guess and Warnaco Group - which makes Calvin Klein jeans and underwear - all reported quarterly profit well ahead of Wall Street expectations. They cited strength at international stores and raised their full-year profit forecasts.
Polo shares are up 19 per cent this year while Warnaco's are up 43 per cent and Urban Outfitters are up 29 per cent. Guess shares are down four per cent and Coach's are down six per cent.
By comparison, shares of J.C. Penney and Macy's, which have nearly no exposure overseas, are down 14 per cent and 22 per cent, respectively. Shares in American Eagle Outfitters Inc, whose international presence is limited to Puerto Rico and Canada, are down 33 per cent.
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