Ukraine war to sully clothes sales from Levi to Ralph Lauren

Carters

08/03/2022 14:02

* War rattles supply chains just recovering from pandemic
    * Nike, Levi's and PVH among those most exposed in Europe
    * Russia's invasion has ripple effect across apparel sector

    By Praveen Paramasivam
    March 8 (Reuters) - Levi Strauss  LEVI.N  and Ralph Lauren
 RL.N  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  PVH.N , Levi Strauss, Ralph Lauren, Michael
Kors owner Capri Holdings  CPRI.N  and Nike  NKE.N , 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.
    
    DOWNGRADES
    Due to the war, Wedbush analysts have reduced yearly revenue
growth estimates by anywhere from 100 to 400 basis points for
Adidas AG  ADSGn.DE . and at least eight U.S.-based companies
including Skechers USA Inc  SKX.N  and Farfetch Ltd  FTCH.N . 
    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
Inc  CRI.N , Bath & Body Works Inc  BBWI.N  and Kate Spade-owner
Tapestry Inc  TPR.N , 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.

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Sales of U.S. brands with high Europe exposure to suffer    https://tmsnrt.rs/3MAoigH
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 (Reporting by Praveen Paramasivam in Bengaluru; Writing by
Aishwarya Venugopal;
Editing by Andrew Cawthorne)
 ((Praveen.Paramasivam@thomsonreuters.com;))