Ukraine war to sully clothes sales from Levi to Ralph Lauren
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Levi Strauss and Ralph Lauren are among U.S. apparel brands likely to be worst hit by Russia’s invasion of Ukraine which is again clogging supply chains in Europe where they derive at least a quarter of sales, Wall Street analysts say.
American clothes firms’ European businesses were just recovering from two years of pandemic restrictions. But war-related Western sanctions on Moscow, airspace bans, and shipping route changes have put new squeezes on East-West supply chains.
“Cargo checks are now one of the biggest disruptions to shippers, making sure they are not breaking sanctions at ports in the EU (European Union) and the UK,” said Jane Hali, CEO of investment research firm Jane Hali & Associates.
Analysts see particular exposure to Calvin Klein and Tommy Hilfiger owner PVH, Levi Strauss, Ralph Lauren, Michael Kors owner Capri Holdings and Nike , who get roughly 25%-40% of sales from Europe.
“Europe is definitely going to feel the brunt of the economic damage … which will impact consumer sentiment and consumer wallets,” CFRA Research analyst Zachary Warring said on the fallout for apparel retailers.
Due to the war, Wedbush analysts have reduced yearly revenue growth estimates by anywhere from 100 to 400 basis points for Adidas AG. and at least eight U.S.-based companies including Skechers USA and Farfetch Ltd.
The brokerage also downgraded ratings on PVH and Ralph Lauren’s stock to “neutral” from “outperform,” while reducing Nike’s price target.
Adding to sales pressures, numerous brands have also halted operations in Russia altogether in protest or because of the newly-difficult operating environment. Chinese manufacturers had been sending more goods to Europe by rail across Russia.
Companies with a smaller European presence, such as Carter’s, Bath & Body Works Inc and Kate Spade-owner Tapestry, are likely to be more insulated, analysts said, but the challenge remains sector-wide.
“We’re afraid it won’t just be retailers with high exposure to Europe but most of retail,” CFRA’s Warring said.
Questions & Answers
Q.Which specific supply chain disruptions are affecting apparel brands due to the Ukraine war?
Which specific supply chain disruptions are affecting apparel brands due to the Ukraine war?
War-related Western sanctions on Moscow, airspace bans, shipping route changes, and cargo checks for sanction compliance are all causing new squeezes on East-West supply chains for these companies.
Q.Which apparel companies are analysts predicting will be most significantly impacted by the situation?
Which apparel companies are analysts predicting will be most significantly impacted by the situation?
Analysts see particular exposure for PVH (Calvin Klein, Tommy Hilfiger), Levi Strauss, Ralph Lauren, Capri Holdings (Michael Kors), and Nike, as they derive a significant portion of their sales from Europe.
Q.What actions have some brands taken in response to the war, in addition to sales pressures?
What actions have some brands taken in response to the war, in addition to sales pressures?
Numerous brands have halted operations in Russia entirely, either as a form of protest against the invasion or due to the increasingly difficult operating environment created by the conflict.
Q.How have analysts revised financial forecasts for some companies due to the war's impact?
How have analysts revised financial forecasts for some companies due to the war's impact?
Wedbush analysts have reduced yearly revenue growth estimates for Adidas AG and at least eight US-based companies, including Skechers USA and Farfetch Ltd, by 100 to 400 basis points.
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