Strong export growth and innovative products paid dividends for some brands in 2014

Strong export growth and innovative products paid dividends for some brands in 2014

Successful turnaround plans, strong export growth, and innovative products paid dividends for some brands in 2014, while others were dented by takeover talk, adverse currency impacts and unsubstantiated marketing claims.

WINNERS

Esprit
Transformation was the name of the game for Hong Kong-listed casual fashion brand Esprit Holdings Ltd. In September 2014, CEO Jose Manuel Martínez Gutiérrez described the brand's past financial year as "very important," saying it had reached two major milestones in its turnaround strategy: the implementation of a vertically integrated model, and a return to profit. The company has bet on vertical integration for both retail and wholesale channels as the path to profitability and it appears to be working; net profits reached HKD210m (US$27.10m) for the year to 30 June 2014, compared to a loss of HKD4.39bn (US$566.12m) in the same period of the previous year.

Moncler
Proving once again that luxury never goes out of style, Italian fashion group Moncler nearly doubled its net profit year-on-year for the first nine months of the year, thanks to strong export growth. The company said revenues overall rose 18% at constant exchange rates thanks to 36% revenue growth in the Americas, and 35% in Asia, where China, Japan and South Korea sales performed particularly well. Local sales, on the other hand, were down 1% in the first nine months of 2014 compared to the previous year in cash-strapped Italy. But that was not the case elsewhere in Europe, where strong performances in Germany, France and Britain helped its Europe, Middle East and Africa (EMEA) region achieve a 14% revenue increase at constant exchange rates. Moncler plans to increase its number of mono-brand stores to more than 160 by the year end.

Crocs
Whoever said the craze for plastic clogs would never last? Despite a shaky start to the year, iconic US-based plastic shoe brand Crocs booked an increase in earnings in its third-quarter, thanks to first results of the company's turnaround plan implemented in July. Net income amounted to US$15.80m in the three months to the end of September, compared to US$13m in the prior year. In the same time period, gross margin narrowed to 51.3% from 53.2% in the comparable period last year, while revenue increased 4.8% to US$302.4m. Despite unfavourable exchange rates, the firm reported 13% year-on-year revenue growth in Europe, driven by strong wholesale performance. American revenue grew 10% but the greater China region (including Hong Kong, Macau and Taiwan) under-impressed.

Under Armour
Despite intense rivalry from a host of competitors, US sportswear brand Under Armour has once again proved its financial stamina, upping its full-year guidance delivered in October. The brand revealed an increase in third-quarter earnings and sales with net income in the three months to the end of September growing 22% to US$89m from US$73m in the same period of the previous year. Sales grew 30% to US$938m thanks to "momentum and growing confidence" in the footwear and international divisions. Apparel revenues were up 26% in the quarter to US$705m, driven primarily by expanded offerings and platform innovations across the training, golf, and outdoor segments.

Black Diamond
With meteorology defying logic all over the globe this year, and especially in North America, outdoor sportswear and equipment specialist Black Diamond Equipment Ltd proved it could weather any storm with full-year forecasts of US$192m to US$197m in sales, up 14% to 17% on last year. The US-based company reported sales increases across all brands and regions. "This efficiency and process improvement within our supply chain, along with a higher margin product mix, also drove a positive increase in consolidated gross margin to 41.4%," said CEO Peter Metcalf. "Consolidated third quarter results also reflect the continued implementation of the company's strategic pivot, the impact of the sale of Gregory [Mountain Products], and longer term investments in [the] POC, PIEPS and Black Diamond Apparel" brands.

LOSERS

Puma
As rumours flew about a possible acquisition of global, Germany-based sportswear brand Puma - with the US-based VF Corporation tipped in November as the most likely buyer - net earnings plummeted. In its second-quarter, Puma recorded a 76.2% drop in net earnings, even though the performance was in line with both analyst and company expectations. Third-quarter sales figures were however more hopeful, with apparel sales up 11.4% to EUR323m (US$402.94m), and footwear sales up 2% to EUR374m (US$466.57m), although consolidated net earnings declined to EUR29m (US$36.18m) from EUR53m (US$66.12m) a year earlier. Gross profit margin declined from 47.1% to 46.3% on the back of adverse currency impacts, as well as shifts within the product mix, according to analysts.

J Brand
Losses that included an impairment charge, writing off goodwill at Fast Retailing's premium US denim subsidiary, J Brand Holdings, hit Asia's biggest retailer hard this year, with a 10% decrease in its expected full year profit this year as a result. Japan's Fast Retailing acquired Los Angeles-based J Brand in 2012. Although the brand's performance has been disappointing, Fast Retailing's Uniqlo label has compensated handsomely, with strong growth in South Korea, greater China and Europe, and a 64.7% surge in revenues at Uniqlo International to JPY413.60bn (US$3.50bn) in the year to 31 August and a 21.8% revenue increase to JPY251.20bn (US$2.12bn) for the company's global brands division.

Norm Thompson Outfitters and Wacoal America
Two shapewear companies learned the hard way that unsubstantiated marketing claims can be expensive, as they were ordered to pay more than US$1.5m in refunds to consumers for making misleading claims their shapewear garments would help users lose weight and cellulite. The USA's Federal Trade Commission (FTC) said in September that slimming claims made by Norm Thompson Outfitters Inc and Wacoal America Inc for their caffeine-infused products were "false and not substantiated by scientific evidence." Norm Thompson was said to have "deceptively advertised, marketed, and sold" women's undergarments infused with microencapsulated caffeine, retinol, and other ingredients, claiming the 'shapewear' would slim and reshape the wearer's body and reduce cellulite.

Pumpkin Patch
New Zealand-based children's wear brand Pumpkin Patch disappointed this year, posting significant losses. In the 12 months to the end of July, the company reported a net loss of NZD10.20m (US$7.84m) from earnings of NZD5.10m a year earlier. Total revenue dropped to NZD240.90m (US$185.3m), down 17% on last year. Sales were influenced by a stronger New Zealand dollar, according to the company, resulting in lower overseas earnings. Pumpkin Patch, however, remained optimistic about a two-year transformation process that is currently underway, with hopes that it will improve the company's future financial position by investing in omni-channel retailing and leveraging the brand's loyal customer base.

Urban Outfitters
While its same-named parent retailer posted solid financial results, lifestyle brand Urban Outfitters saw sales drop 7% in the quarter ending 31 October, continuing its less than impressive results this year. Sister brands Free People and Anthropologie drove growth for the company, posting a 15% and 2% increase respectively in sales in the same period. Analysts said the Urban Outfitters brand could learn further from its online success and that it needs to work harder on aligning its target market, with increased attention on the shifting teen and young adult landscapes that incorporate competitive e-commerce, fast fashion, international retailers and spending shifts.

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