Ralph Lauren: War in Ukraine to sully Levi’s clothing sales to Ralph Lauren
European businesses of American clothing companies were just recovering from two years of pandemic restrictions. But Western sanctions related to the war on Moscow, airspace bans and changes in shipping routes have put new strains on East-West supply chains.
“Cargo checks are now one of the biggest disruptions for shippers, ensuring they don’t breach sanctions at EU (European Union) and UK ports,” said Jane Hali. , CEO of investment research firm Jane Hali & Associates.
Analysts see particular exposure to PVH, owner of Calvin Klein and Tommy Hilfiger, Levi Strauss, Ralph Lauren, Capri Holdings, owner of Michael Kors and Nike, which account for around 25-40% of sales in Europe.
“Europe will definitely feel the brunt of the economic damage…which will impact consumer sentiment and wallets,” CFRA Research analyst Zachary Warring said of the fallout for apparel retailers.
Due to the war, Wedbush analysts cut annual revenue growth estimates by 100 to 400 basis points for Adidas AG. and at least eight US-based companies, including Skechers USA Inc and Farfetch Ltd.
The brokerage also downgraded the ratings for PVH and Ralph Lauren shares to “neutral” from “outperforming,” while lowering Nike’s price target.
Adding to the sales pressure, many brands have also halted operations in Russia altogether in protest or due to a newly challenging operating environment. Chinese manufacturers had sent more goods to Europe by rail through Russia.
Companies with a smaller European presence, such as Carter’s Inc, Bath & Body Works Inc and Tapestry Inc, owner of Kate Spade, are likely to be more isolated, analysts say, but the challenge remains industry-wide.
“We’re concerned that it’s not just retailers with high exposure to Europe, but most retailers,” CFRA’s Warring said.
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