nordstrom polo It’s Fashionable To Dump Ailing Designer Stocks
July 13, 2000By CHELSEA EMERY Bloomberg News
NEW YORK Tim Ghriskey’s wife, Lisa, designed sweaters for Polo Ralph Lauren Corp. for six years. Not even that can persuade him to own the stock, though. The senior portfolio manager at Dreyfus Corp. dumped shares of the clothing designer a month and a half after buying them in the company’s 1997 initial public offering.
Ghriskey also unloaded all his shares of shoe designer Kenneth Cole Productions Inc. in May. He’s not the only investor casting off fashion stocks. Shareholders have fled former high flying stocks such as Tommy Hilfiger Corp. as fashions changed and, in some cases, investors forecast declining profits.
“I have problems with the fashion group because brands come and go, and these are based on the image of the founder,” said Ghriskey, whose firm also formerly owned shares of Donna Karan International Inc. “People don’t live forever, and they aren’t in style forever.”
That makes fashion shares risky for long term investors. Tommy Hilfiger, for example, returned an average of 37 percent a year from 1993 to 1996 and surged another 70 percent in 1998 as its trademark red, white and blue labeled casual khaki pants and T shirts caught the eye and wallets of young adults. Since its peak in 1999,
though, the shares have fallen 79 percent.
New York based Ralph Lauren’s high came on its second day of trading, and the shares have since declined 48 percent. Though Lauren’s trademark polo logo still has some cachet with customers, the stock does not. It has dropped 1.5 percent this year.
Donna Karan, a New York company known for its line of upscale women’s suits, peaked the first day the company traded publicly in 1996. Shares since have sunk 76 percent.
“If you’re not hot, people don’t buy the clothes, and it kills the stock,” said Tim Bui, who helps oversee about $5 billion for PPM America Inc. and owns Liz Claiborne Inc. shares.
Hong Kong based Tommy Hilfiger has sunk 63 percent this year as customers turned toward more conservative casual clothes and investors became wary of the company’s profit outlook.
“Tommy got caught in a fashion movement, and now they just don’t have it,” said Susan Byrne, who helps manage the Gabelli Westwood Equity Fund. “By nature, [apparel manufacturers] are cyclical stocks.
“People don’t pay high premiums for companies whose growth isn’t perceived to be consistent and stable for good reason.” Byrne said her fund holds shares of jewelry retailer Tiffany Co.,
though it doesn’t own Tommy Hilfiger.