Luxury retailers such as Coach and Tiffany’s are down over 5% today on investor worry over their significant exposure to Japan.
Analyst Brian Sozzi noted that these companies are especially vulnerable as Tiffany’s has stores along the coast and Coach has an outlet in the Fukushima region.
Both companies have had to close shops and reduce hours.
From Wall Street Strategies’ Brian Sozzi (emphasis ours):
I attribute the stronger sell-offs today in shares of Tiffany & Co. (TIF) and Coach (COH) to the premiums the stocks are valued at when compared to the broader retail sector and equities markets. Consequently, any swift decline in sales, despite muddling growth in the country for each, raises the risk to future earnings. Both companies, in my view, have been managing their Japanese businesses to profitability rather than new unit growth. Note to investors: It’s not the amount of sales in which retailers derive from Japan per se, it’s the store clustering in close proximity to the damaged areas and the profit generated by operations in Japan.
Coach and Tiffany’s count on about 20% of annual sales coming from Japan.
Japan makes up 11% of the global luxury sales market.