本周零售与奢侈品观察

General Retail & Luxury Weekly Retail & Luxury Look of the Week Research Analyst Itwasnicenottobelookingconstantlyatsharepriceswhileoutlastweek,given +44-20-754-17812 the macro volatility.The Luxury sector saw the majority of the volatility this week,with reporting generally disappointing-though most companies pointed to aslightlybetterMarch (exMiddleEast)exitrate.KeringpostedresultsandhosteditsCMD during the week; we found the share price reaction disappointing as theresultswerenotthatbadandtheCMDdelivereda credible strategicoutlineforthenext 5years.The cFX sales performance across LVMH, Hermes and Kering was allslightly lacklustre with the share prices retrenching again after the macro-drivenMiddle East rebound. The global stock markets are near all-time highs again,although this has not filtered down to the consumer discretionary (or staples)nameswithpositiveearningsmomentumstillararecommodity.Thefood retailersarepotentiallyamongstthe small basketofconsumerbeneficiariesfrom inflation. Alison LygoResearch Analyst+44-20-754-11724 Benjamin Yokyong-ZoegaResearch Analyst+44-20-754-12338 ResearchAssociate+44-20-754-19487 Shwetha RamachandranResearchAssociate The lowerfear discountfrom the oil shocksis beingfurthersupported bythebetterUSandChinamacrodataprintsthisweek(improvingUSADPweeklyemploymentand Fed business outlook; and higher-than-expected China Q1 rGDP).The dataconfirmed more economic resilience than previously feared, but there is stilldownside risk to economic growth and we need to see how the rest of Aprilperforms.Consumerconfidenceis amorerelevantmeasureforusandwewaittoseehowthefinalAprilandtheMaypreliminaryconsumerconfidenceindicesshapeup. The week ahead Nextweek,wehaveABFoods,Moncler,AsOSand Sainsbury'sreporting.Ofthese,AB Foods will likely be the most interesting, in our view, with the decision on thePrimarkspin-offlikelytobeconfirmedafterafewmonthsofdebate.Theactualresultswill reflect justthestubperiodofJanuaryandFebruarywhichshouldnotguidancetobeloweredacross a numberofthebusinessunits.Mostattention sitswith Primark, so current trading for March and April will be relevant given theMiddle East and consumer confidence deterioration. In our view, the sales andprofitmarginguidanceweresetconservatively,sothisshouldbemaintained,sothepressure may sit with the Foods businesses this time. Retail - Non FoodGeneral Retail&LuxuryWeekly Isthesalesweakness inLuxury1QjusttheMiddleEast? ThereportingthisweekhasgenerallybeendisappointingfromtheLuxurynameswith 1-2ppt misses on cFX.The Middle East impact has been quantified at 100-150bp but some of this was already in consensus expectationswhich suggeststhere is an underlying slowdown as well in either Europe or Asia (or both). Theslowdown in EuropewaslargelytouristdrivenfromChina,MiddleEast(andtheUsto a degree) with local spend holding up. Hermes was weaker than expected inChina,Kering sufferedfromGucciweakness inAsiaandEuropeandLVMHF&Lwasmore Europe related. It would be simpletopin the blame on the Middle East but itdoes feel like overall luxury consumption outside of the Us has been a bit more(ex Middle East) exit rate and have portrayed confidence in a sequentialimprovement as the year progresses. Overall, whilst we still see incrementalprogress, we think that it is likely to be slower than we previously expected Did theKering CMDprovidereassuranceon the investmentcase? Thesharepricereactionafterthe1QandonthedayoftheCMDwasdisappointing,in our view, as the results were not that bad and the CMD delivered a crediblestrategic outlineforthenext5years.Themainissuefrom theCMDwas theinability(or unwillingness)of management to pull together the bottom-up detailedguidance into a coherent top-down financial outlook that would have betterportrayed their confidence that the plan can be delivered irrespective of the marketgiven the scope formarket share gains.As an example,thebottom-up objectivesfor Gucci suggested an additional 2.1bn of sales opportunity but this was notarticulated into a targetforoverall Guccirevenue which makes it hard to benchmarkthesuccessoftheplan.Withaturnaroundplan,thetimelinecanbe uncertainandwe appreciate the"at least"22% EBIT margintarget but there is a risk that ittakestoo long and withoutmilestones,it is hardforinvestorstogaugeprogress and holdmanagementtoaccount.Weviewthis as a missed opportunitybut it does giventhem leeway to push out the delivery and this may be rewarded with a lowermultiple looking forward unless the sales recovery comes through to a greaterextentthanconsensusexpects. Retail - Non FoodGeneralRetail&LuxuryWeekly yearahead? viewed as a relative safe haven over the conflict. FY results this week deliveredanotherprofit beat, although initialguidancewas setcautiouslywithflatprofits atthe mid-pointand a wider-than-usual range.This provides Tesco with the flexibilityto respond within an uncertain macro backdrop and underlines management'sintention to investtodefend the valueposition,even if this means accepti