Gavekal Capital: Strong Consumer Confidence Not Helping European Retailers

Friday, March 21, 2014

Strong Consumer Confidence Not Helping European Retailers

Preliminary results indicate that European consumer confidence rose more than anticipated, with the measure closing in on levels not seen since prior to the global financial crisis:

As we would expect, this bodes well for a continued recovery in household consumption in the Euro area and confirms stronger than expected retail sales data that was released earlier this month:

In contrast, stock performance of all of the Apparel, Accessories, & Luxury Goods companies in MSCI Europe has not been positive so far this year...

Since foreign sales accounts for more than 60% of total sales in all but two of this sub-industry's members, we are not surprised to see a disconnect between these stocks and sentiment in Europe. The underperformance is more likely the result of consistently negative revisions to sales and earnings estimates over the last 1-, 3-, and 6-month time periods:

About Gavekal Capital

Gavekal Capital is a US registered investment advisory firm that manages the Gavekal Knowledge Leaders Strategy. Knowledge Leaders are a group of the world’s leading innovators with deep reservoirs of intangible capital. These companies often possess competitive advantages such as strong brand, proprietary knowledge or a unique distribution mechanism. Knowledge Leaders are largely service-based and advanced manufacturing businesses, often operating globally. Gavekal Capital seeks to identify the world’s leading knowledge companies through a proprietary process that analyzes corporate knowledge investments.
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