15 July 2010

Investing: Style Notes

Swiss private bank Vontobel is issuing equity-linked structured notes that track the performance of luxury goods retailers such as Hermes, Polo, Burberry, and Coach. Bloomberg reports:

The two-year note is aimed at private banks and asset managers, according to Georg Vonwattenwyl, Vontobel’s Zurich- based head of financial products distribution. The bank will issue as much as 20 million euros ($25 million) of the notes, which start trading July 16 on the SIX Swiss Exchange Ltd. and Germany’s Stuttgart and Frankfurt bourses.

Luxury goods companies in Europe are expected to post sales growth of 7 percent on average this year, after slumping 6.6 percent in 2009, according to a Vontobel report. Fashion companies returned about 50 percent last year, according to the Swiss bank, almost double the 27 percent gain in the MSCI Europe Index of 461 stocks.

Vontobel’s notes will return to investors any gain or loss on the basket of 11 stocks that also includes Bulgari SpA, Burberry Group Plc, Coach Inc., Cie Financiere Richemont SA, Louis Vitton Moet Hennessy SA, Swatch Group AG, Tiffany & Co. and Tod’s SpA.

The Swiss bank issued similar notes in 2004 that earned 20.3 percent for buyers that held them for all of their 18-month term.


I wonder if a similar instrument could be issued to track the profit performance of, for example, Brooks Brothers, Cleverley, J.Crew, J.Press, and Crockett & Jones?

Given the amount of cash we drop on their wares--hell, I am practically a shareholder--these companies should be doing quite nicely.

7 comments:

Tabitha said...

I have no financial acumen whatsoever, even reading that was a stretch for me.

Belle de Ville said...

Interesting. I do wonder what the projected growth numbers of the middle market firms like Brooks Brother's and J. Press will be.

Wouldn't it be great if these firms had some kind of dividend reinvestment plan where the more product you purchased, you recieved some kind of dividend that was either in more goods or stock.

Tabitha said...

Belle de Ville just slamdunked me!
But I bake tasty cakes...

K.S. Anthony said...

I've worked for three of the companies Vontobel mentions. Two are traded on the NYSE. One, if I recall correctly, is only traded on the European markets. It's amazing what "luxury" goods retailers will do to show a profit...

Among other things, you simply rid your goods of luxury. And then you make sure no one--including your shareholders--knows a damn thing about the reason behind it. Might start a fire and a panic. One of these said companies did no less than three massive rounds of forced retirements and layoffs last year with nary a word whispered about it in the press. 7% growth on a 6.6% slump...? That's retail math for you.

I strongly suspect that companies like J. Crew and B2 are doing much better than their higher priced cousins in the accessories and jewelry market. Far easier to keep costs down. I wonder if that's why madras is so popular this season?

Laguna Beach Trad said...

I have noticed during recent visits that the local plaza where these companies have storefronts is packed with consumers from Asia and the Middle East.

A.E.F. said...

Admiral - A facinating post. My own financial acumen is more or less limited to the maxim 'easy come, easy go'.

initials CG said...

Well, it was funny. Swiss firms can place shoelaces on the exchange, and someone will always pay a premium...