Weekly Market Update: Early 2023 optimism persists another week
The promising 2023 start for global equities continued this week. EU stocks moved back within 10% of all-time highs while the S&P climbed back above 4,000, testing its 200-day moving average. China’s reopening and improving inflation data were the underlying drivers. The December Manheim Used Vehicle Value Index registered the largest annualized decline in the series’ history, ahead of Thursday’s CPI data. The US dollar continued to retreat as markets became more comfortable with the expectation that the Fed will downshift to 25 basis point rate hikes. Oil and copper prices rose after the Chinese economy officially reopened and Beijing continued to talk up the need to support growth. Natural gas prices stayed volatile, but held at the lowest levels since the summer of 2021, resulting in analysts revising higher their outlook for European growth this year.
US CPI data showed inflation continued to slow in December. Shelter costs remained the major driver to the upside, while services continued to run hotter than the Fed wants to see. Nevertheless, headline inflation fell on a month over month basis for the first time since May 2020. The general trend in the economic data has led a growing number of FOMC members to express support for raising rates by only 25 basis points at the February 1st meeting, and Philadelphia Fed President Harker added to that tally following Thursday’s CPI print. Futures markets quickly solidified around expectations for a 25 bps hike next month. The US Dollar index held near a 7-month low, while gold prices approached fresh 6-month highs, breaking above $1,900. The Greenback lost more than 3% against the Yen amid a growing belief the BOJ will formally switch course by the time leadership changes hands at the end of Q1. The US 2-year yield fell below 4.2% and the 10-year retreated below 3.5%. For the week, the S&P gained 2.7%, the DJIA was up 2%, and the Nasdaq surged 4.8%.
Investors poured over a litany holiday sales updates signaling some caution around consumer discretionary spending. Swedish appliance giant Electrolux reported weak preliminary Q4 results, citing larger than expected inventory reduction activities. Bed Bath & Beyond reported another terrible quarter amid steady reports that the company is preparing for bankruptcy imminently. Retailer Abercrombie & Fitch bucked the trend, boosting its Q4 guidance based on better than expected holiday sales. JP Morgan and Bank of America reported strong quarterly results, while Citigroup lagged a bit behind its Wall Street rivals. Shares of Delta American Airlines soared, as Delta said momentum has continued in 2023 following strong Q4 results, while American raised guidance substantially ahead of its quarterly report. In another positive sign on the inflation front, Tesla dramatically slashed prices on its most popular vehicle models, reversing most of the price increases implemented over the last two years. Shares of Disney rose steadily throughout the week as it appointed former Nike CEO Mark Parker as its Chairman and addressed an activist push from Trian’s Nelson Peltz. The WWE remained the center of M&A speculation, with some reports suggesting a deal could be done by mid-year.
Closing Stock Market SummaryThe stock market opened to weakness today due to some profit taking activity following a big run recently. Some of the early weakness could be pinned on mixed earnings results from several influential banks that all featured increased provisions for credit losses.
Bank of America (BAC 35.23, +0.76, +2.2%), JPMorgan Chase (JPM 143.01, +3.52, +2.5%), Wells Fargo (WFC 44.22, +1.39, +3.3%), and Citigroup (C 49.92, +0.83, +1.7%) opened to mixed price action following their earnings reports, but like the broader market, recovered noticeably from levels seen at the start of the session.
Buyers were quick to jump on the opening weakness and controlled the price action for nearly the entirety of today's session. Just about everything reversed from the opening weakness and finished on an upbeat note. The S&P 500, which broke through technical resistance at its 200-day moving average (3,981), closed just shy of the 4,000 level, which is an area it hasn't seen since mid-December.
Resilience to early selling efforts, along with strength in the mega cap space, fueled today's turnaround. The Vanguard Mega Cap Growth ETF (MGK) had been down 0.9% at this morning's low before settling the session with a 0.7% gain. The Invesco S&P 500 Equal Weight ETF (RSP) logged a more modest 0.2% gain while the S&P 500 rose 0.4%.
Tesla (TSLA 122.40, -1.13, -0.9%) went against the grain today after The Wall Street Journal reported the EV maker cut prices in the U.S. for some of its cars by close to 20%, although it stormed back from an opening 6.4% loss.
Despite Tesla's underperformance, the S&P 500 consumer discretionary sector (+1.0%) closed at the top of the leaderboard among the 11 sectors. The financials sector, led higher by the banks that reported earnings, closed just behind the consumer discretionary sector with a 0.7% gain.
Only three sectors -- real estate (-0.6%), utilities (-0.4%), and industrials (-0.1%) -- remained in negative territory by the close.
The 2-yr Treasury note yield rose nine basis points to 4.22% and the 10-yr note yield rose six basis points to 3.51%, giving way to selling interest after a strong start to the year.
- Russell 2000: +7.1% YTD
- S&P Midcap 400: +6.2% YTD
- Nasdaq Composite: +5.9% YTD
- S&P 500: +4.2% YTD
- Dow Jones Industrial Average: +3.5% YTD
Reviewing today's economic data:
- December Import Prices 0.4%; Prior was revised to -0.7% from -0.6%
- December Import Prices ex-oil 0.4%; Prior was revised to -0.3% from -0.4%
- December Export Prices -2.6%; Prior was revised to -0.4% from -0.3%
- December Export Prices ex-ag. -2.7%; Prior was revised to -0.7% from -0.6%
- January Univ. of Michigan Consumer Sentiment - Prelim 64.6 (consensus 60.5); Prior 59.7
- The key takeaway from the report is that consumer sentiment picked up in January on better feelings about personal finances that stemmed from higher incomes and easing inflation.
As a reminder, bond and equity markets are closed Monday for Martin Luther King Jr Day.
Looking ahead to Tuesday, economic data is limited to January Empire State Manufacturing survey (consensus -8.5; prior -11.2) at 8:30 ET.
Internal Documents Show Prominent Democrats Knowingly Pushed Russiagate Lie
The latest Twitter Files release shows how prominent Democrats knowingly pushed a false Russiagate-related narrative about “Russian bots” promoting a key House Intelligence Committee memo that detailed efforts to spy on the Trump campaign, despite the lawmakers being told by Twitter executives that it wasn’t true.
The 14th instalment of the Twitter Files was released on Jan. 12 by journalist Matt Taibbi, who explained in a series of posts that, at a key moment in the Trump-Russia investigation, Democrats alleged that “Russian bots” were spreading an explosive report from then-Chairman of the House Intelligence Committee Rep. Devin Nunes (R-Calif.).
“At a crucial moment in a years-long furor,” Taibbi explained in one of the posts, “Democrats denounced a report about flaws in the Trump-Russia investigation, saying it was boosted by Russian ‘bots’ and ‘trolls.’”
“Twitter officials were aghast, finding no evidence of Russian influence,” Taibbi continued.
In support of this take, Taibbi shared screenshots of correspondence from Twitter executives to several Congressional Democrats, including Rep. Adam Schiff (D-Calif.) and Sen. Dianne Feinstein (D-Calif.), confirming that they had “not identified any significant activity connected to Russia with respect to Tweets posting original content to this [#ReleaseTheMemo] hashtag.”
The #ReleaseTheMemo hashtag spread like wildfire on Twitter, topping its trending list starting on Jan. 18, 2018 and reflecting the widespread call to publicly release a then-classified memo submitted by Nunes, who at the time was the chairman of the House Intelligence Committee.
Widely referred to as the Nunes memo (pdf), it was later declassified under then-President Donald Trump’s order on Feb. 2, 2018.
The memo showed how the FBI under the Obama administration used unverified opposition research—the infamous “Steele Dossier” funded by Hillary Clinton’s presidential campaign and the Democratic National Committee—to obtain a FISA warrant to spy on Trump campaign volunteer Carter Page as part of an investigation into alleged Russian interference in the 2016 presidential election.
The claims made in the Nunes memo were confirmed by Justice Department Inspector-General Michael Horowitz in his report, released on Dec. 9, 2019.
Push From Democrats, Media Outlets
Rep. Matt Gaetz (R-Fla.) and Rep. Steve King (R-Iowa) had introduced the #ReleaseTheMemo hashtag on Jan. 18, 2018, and on the following day, joined a group of 65 House Republicans calling for the declassification of the memo. Many of the lawmakers, who collectively represent millions of voters, also sent out the hashtag on Twitter.
Just days later, on Jan. 23, 2018, Democrat lawmakers, including Feinstein and Schiff, wrote an open letter to then-Twitter CEO Jack Dorsey and Facebook CEO Mark Zuckerberg to investigate allegations of “Russian bots and trolls surrounding the #ReleaseTheMemo online campaign.”
The letter from Feinstein and Schiff led Sen. Richard Blumenthal (D-Conn.) to himself issue a letter (pdf) that also alleged the hashtag was a part of Russian disinformation campaigns.
“We find it reprehensible that Russian agents have so eagerly manipulated innocent Americans,” he wrote in a letter issued later that day—even though before the letter’s issuance, Twitter’s staff told the senator’s staffers they did not believe Russian bots were behind the hashtag, Taibbi reported.
Multiple legacy outlets also did the same, claiming Russian bots and trolls were behind the effort. All had cited the same source—the Hamilton 68 dashboard, a project with the Alliance for Securing Democracy (ASD), an organization that tracks 600 Twitter accounts it claims are linked to the Russian government or repeat its news.
According to Taibbi, executives inside Twitter at the time complained that “Hamilton 68 seemed to be everyone’s only source, and no one was checking with Twitter” to verify the claims.
Twitter Internally Disputed ‘Russian Bots’ Claims
Taibbi shared an email from Emily Horne, who was at the time the global policy communications director of Twitter. The email, shared internally on Jan. 23, said that “it is extraordinarily difficult for outside researchers, who do not have access to our full API and internal account signals, to say with any degree of certainty that they believe an account is behaving suspiciously is 1) automated and 2) Russian.”
Yoel Roth, who was Twitter’s trust and safety chief at the time, reportedly told colleagues: “I just reviewed the accounts that posted the first 50 tweets with #releasethememo and … none of them show any signs of affiliation to Russia.”
Taibbi reported that “outside counsel from DC-connected firms like Debevoise and Plimpton” had advised Twitter to respond to lawmakers by using language like: “With respect to particular hashtags, we take seriously any activity that may represent an abuse of our platform.”
According to an email screenshot shared by Taibbi, Twitter was also advised to say something to the effect of: “Our initial assessment indicates that these [hashtag] trends are driven primarily by organic, non-automated activity [if true], but we are continuing to analyze the data and … will inform Congress about what we find.”
“Despite universal internal conviction that there were no Russians in the story, Twitter went on to follow a slavish pattern of not challenging Russia claims on the record,” Taibbi wrote.
Absent any such challenge, “[a]s a result, reporters from the AP to Politico to NBC to Rolling Stone continued to hammer the ‘Russian bots’ theme, despite a total lack of evidence,” he reported.
“Russians weren’t just blamed for #ReleaseTheMemo but #SchumerShutdown, #ParklandShooting, even #GunControlNow—to ‘widen the divide,’ according to the New York Times,” Taibbi added.
Meanwhile, inside Twitter, staffers acknowledged that both the #SchumerShutdown and #ReleaseTheMemo hashtags “appear to be organically trending.”
“NBC, Politico, AP, Times, Business Insider, and other media outlets who played up the ‘Russian bots’ story—even Rolling Stone—all declined to comment for this story,” Taibbi said. He added that staffers of Feinstein, Schiff, and Blumenthal also declined to comment.
Nunes, who has since departed Congress and is now the CEO of Trump’s TruthSocial platform, told Taibbi: “Schiff and the Democrats falsely claimed Russians were behind the Release the Memo hashtag, all my investigative work.”
Nunes added: “By spreading the Russia collusion hoax, they instigated one of the greatest outbreaks of mass delusion in U.S. history.”
Taibbi remarked: “This #ReleaseTheMemo episode is just one of many in the #TwitterFiles. The Russiagate scandal was built on the craven dishonesty of politicians and reporters, who for years ignored the absence of data to fictional scare headlines.”
The Twitter Files disclosures are a series of revelations based on internal company communications provided to journalists by Elon Musk, who took over the platform several months ago and has pledged to reduce censorship and political bias on Twitter.
Home Prices Will Likely Fall Further _ Link : http://bit.ly/3D8YLbp
Home prices have started to correct as interest rates rose sharply in 2022. However, the real problem for home prices is still coming in 2023 as the standoff between sellers and buyers comes to a head.
However, before we get there, let’s review how we got here.
Since the turn of the century, there have been two housing bubbles, with home prices reaching levels of unaffordability not previously seen in the United States. Such was, of course, due to lax lending policies and artificially low-interest rates luring financially unstable individuals into buying homes they could not afford. Such is easily seen in the chart below, which shows home equity versus mortgage debt. (Home equity is the difference between home prices and the underlying debt.)
The current surge in home prices makes the previous bubble in 2008 look quaint by comparison.
At that previous peak in 2007, the equity in people’s homes was around $15 trillion, while mortgage debt stood at $9 trillion. When the bubble popped, home prices collapsed, flipping homeowner’s equity from positive to negative. Home equity is roughly $30 trillion, while mortgage debts have increased to roughly $12 trillion. That is an incredible spread, unlike anything seen previously.
However, this time, the surge in home prices wasn’t due to a surge in lax underwriting by mortgage companies but rather the infusion of capital directly to households following the COVID-19 pandemic-driven shutdown.
Of course, many young Millennials took that money and jumped into the home-buying frenzy. In many cases, buying sight unseen or willing to pay way over the asking price (thereby inflating home prices.) To wit:
“More and more millennials are sinking huge sums of money into homes they’ve never actually set foot in. While the sharp increase in sight-unseen buying in 2020 was certainly driven by pandemic restrictions, the phenomenon appears to be here to stay, due to the tech-forward nature of millennials and the competitive nature of the housing market.” – Insider Business
Of course, the rush to buy a home, and overpaying for it, led to regret.
“The number-one reason for buyer’s remorse: 30% of respondents said they spent too much money. The second most common regret was rushing the home-buying process, with 30% saying their purchase decision was rushed and 26% indicating they bought too quickly.” – CNBC
Unfortunately, there will be less demand as the massive flood of money into the housing market from Government stimulus reverses.
At The Margin
The problem with much of the mainstream analysis is that it is based on the transactional side of housing. Such only represents what is happening at the “margin.” Rather, the few people actively trying to buy or sell a home impact the data presented monthly.
To understand “housing,” we must analyze the “housing market” as a whole rather than what is happening at the fringes. For this analysis, we can use the data published by the U.S. Census Bureau.
To present some context for the following analysis, we must first have some basis from which to work. Our baseline for this analysis will be the number of total housing units, which, as of Q3-2021, was 143,613,000 units. The chart below shows the historical progression of the number of housing units in the United States compared to the total number of households and an estimate of the total potential households of buyers over the age of 25. For the estimate, we dividend the total active population over the age of 25 by 1.5 to account for single buyers and couples, who tend to make up the majority.
Not surprisingly, there are currently more houses than households to buy. Such is because several homes are vacant for different reasons, second homes, vacation homes, etc. Such is why, as we wrote previously, there isno such thing as a housing shortage.To wit:
“There are three primary issues that lead to changes in the supply of housing:“
- Prices rise to the point that sellers come into the market.
- Interest rates rise, pulling buyers out of the market.
- An economic recession removes buyers due to job loss.
“When those occur, transactions slow down, and inventory rises sharply.”
Not surprisingly, since that article was written in November 2020, just 2-years later, the supply of homes has risen sharply. Such is often a leading indicator of recessionary onsets as well.
Also, sharply rising interest rates pull buyers out of the market.
Another drag on prices in the new year will continue to be inventory coming to market as existing homeowners also try to sell their homes. More inventory and few buyers will equate to a further price drop in the coming year.
Home Prices To Fall Further
The chart below is the most telling of why home prices will fall further in the coming year. It is a composite index of everything involved in housing activity. It compiles new and existing home sales, permits, and housing starts. The index was rebased to 100 in 1999. The runup in the activity index into 2007 was a function, as noted above, of lax lending policies that led to the collapse in activity in 2008.
Following the collapse in 2008, the Fed dropped rates to zero and launched multiple QE programs as the Government bailed out everything that moved. The increase in housing activity over the next decade was unsurprising, and repeated monetary interventions boosted the wealth effect.
However, the sharp jump in housing activity in 2020 resulted from the direct monetary injections into households.
The reversion in home prices that has begun will likely continue as that excess liquidity continues to leave the economic system. That drain of liquidity, coupled with higher interest rates, and less monetary accommodation, will drag home prices lower. As that occurs, the “home equity” that many new buyers had in their homes will dissipate as homeownership costs continue to rise due to higher rates and inflation.
As home price depreciation gains traction, more homeowners will be dragged into selling to retain what value they had. For many Americans, most of their net worth is tied up in the homesteads. As the value fades, the decision to sell becomes more of a panic rather than a need.
While there isn’t a vast wasteland of bad mortgages sitting on the books, as seen in 2008, that doesn’t negate the risk of further home price declines in the coming year.
Not only are further home price declines possible, but it is also probable they could be deeper than many currently expect.
Thom Browne Wins Stripes Trademark Case Against Adidas
The jury found that the designer did not infringe on the sports giant's three-stripe mark.
Thom Browne has prevailed in his trademark infringement suit against Adidas.
On Thursday afternoon, less than three hours after closing arguments concluded, the eight-person jury came back with a verdict that found the luxury designer was not liable for damages or profits that it made selling product with four stripes or its trademark grosgrain ribbon.
“We are pleased that the jury found that at no time did Thom Browne Inc. infringe on any of Adidas’ trademarks. For over 20 years now, Thom Browne has been a pioneering force in luxury fashion, bringing a wholly unique and distinctive design aesthetic that combines classic tailoring with American sportswear sensibilities. We look forward to continuing to design and provide the creative products that have become the hallmark of the Thom Browne label,” a Thom Browne spokesperson said late Thursday.
Adidas America and Adidas AG had been seeking damages in the amount of $867,225 — the amount the companies agree it would have received in licensing fees from Thom Browne Inc., if the two had worked together — as well as the $7,011,961 million in profits it alleges the American designer made from selling apparel and footwear with stripes. The case was heard by Judge Jed Rakoff in Manhattan’s Southern District Court.
On Thursday, attorneys for Adidas and Thom Browne laid out their final arguments in closing statements in the trademark infringement suit between the two companies. And the jury, which heard testimony in the case from both sides over eight days, was charged with determining whether Thom Browne Inc. was liable for trademark infringement or dilution.
Thom Browne’s attorney, Robert T. Maldonado of Wolf, Greenfield & Sacks P.C., started his closing argument with a simple statement: “Adidas does not own stripes.”
He said Thom Browne, the designer and founder of the eponymous brand who was in the front row in his signature shorts suit and striped socks, cared enough about his company to be in court every day. On Thursday, the entire right side of the courtroom was filled with members of his team, all sporting head-to-toe looks from the collection. “He’s recognized as a game changer and an icon in the fashion industry,” Maldonado said of Browne. “The notion of Thom Browne wanting to trade on the reputation of Adidas offends him. He is not Adidas.”
Since the beginning, Browne has been using stripes, he said, to reference collegiate varsity sweaters and he “never considered Adidas” until he was approached by the company in 2007 after it saw some pieces he designed using three stripes as a design choice. Browne agreed to change his mark to four parallel bars so as not to get into litigation with the large sports company.
Maldonado said that Adidas’ trademarks show that it only owns three bars that it uses horizontally nearly all of the time. It also has a trademark for a quadrilateral bar logo.
He pointed to testimony from several witnesses over the course of the trial that, when asked to provide a specific definition for the three-stripe mark, said it could be anything from one to five or six bars, depending upon the usage. And the “smooshing” together of the bars on a collaboration with Gucci was also defined as three bars, another witness testified. On the New Classics collection launched last year, Adidas used stripes on the left sleeve, which a company executive said was “not where you usually see them,” Maldonado said, adding, “there is a complete lack of clarification.”
He proceeded to show documents from Adidas’ internal branding guidelines that designers can only tilt the stripes 20 degrees and use them vertically, never horizontally. And using white-on-white stripes, such as that used by Thom Browne on his sneakers, also violates the rules, Maldonado said. “How are we supposed to know that three stripes mean with all this inconsistent messaging from Adidas?”
Maldonado wrapped up his statement by saying that the luxury pricing of Thom Browne means that no one would be confused into thinking it was made by Adidas. And harm only occurs when someone buys something they think was made by someone else.
Because the two companies had coexisted for more than a decade since Thom Browne switched to four bars, and because Adidas did not show any evidence of harm, Maldonado asked the jury to award the company nothing in its suit. “To award damages, you have to prove harm, so we are asking for zero.”
In his closing argument, R. Charles Henn Jr. of Kilpatrick Townsend & Stockton LLP, who represents Adidas, reiterated the German sports company’s main points and reminded the jury that every trademark case has three interested parties — in this case, Adidas, Thom Browne and the public. The general public, he said, could be confused by the designer’s use of stripes on products that are in Adidas’ wheelhouse such as compression tights, T-shirts, jackets and other sports-themed apparel, as well as sneakers.
Because Adidas is well-known for the three-stripe mark it has been using in the U.S. since the 1950s, Henn said, consumers may see Thom Browne pieces in stores or on the street and be confused as to the maker. Adidas is not alleging that anyone spending $3,000 on a Thom Browne cashmere sweatpant and hoodie with stripes on the side would believe they were purchasing an Adidas product, he stressed, but if the product wasn’t clearly identified as Thom Browne on social media or when being worn in public, there could be confusion.
Henn said that Adidas’ “multiple” trademark registrations cover the use of three stripes on apparel and footwear in black-and-white or color as well as on the trifoil logo it began using in the 1970s and the “badge of sport” corporate logo it started using in the 1990s.
Over the years, Adidas has used the stripes horizontally, vertically and diagonally in a variety of colors. In addition, the company spends $300 million a year advertising the stripes and products sporting the mark in the U.S. account for $3.1 billion in annual sales, he said.
“It is one of the strongest trademarks in the United States when it comes to apparel and footwear,” Henn said.
Although Thom Browne, which had used three stripes on some pieces since its launch in 2003, switched to four parallel bars in 2008 after Adidas approached the company, Henn said many consumers still confuse the number of stripes when viewed from a distance. In addition, the “negative space” between the primary stripes can create the optical illusion that there are three bars.
He reminded the jury of the consumer survey conducted by Hal Poret that found 26.9 percent of the 2,400 participants believed Adidas was the manufacturer of some Thom Browne sports-related pieces with four parallel stripes.
Henn also pointed to Thom Browne’s move to increase its sportswear business by partnering with sports teams such as the FC Barcelona soccer club and its star athlete at the time, Lionel Messi, who had been an Adidas-sponsored ambassador for 15 years, as well as the Cleveland Cavaliers of the NBA where Adidas has had a long relationship, as evidence of bad faith among the Thom Browne team.
Following the verdict, Adidas out out a statement that said: “We are disappointed with the verdict and will continue to vigilantly enforce our intellectual property, including filing any appropriate appeals.”
Douglas Hand, an attorney with Hand Baldachin & Associates LLP, called the ruling “sound.
“This is a case of there being no confusion in the minds of consumers between the stripes in Thom Browne, the brand, and what Adidas uses. It’s a good thing for brands and the public at large. Stripes are a fundamental component of sportswear and there’s a function to stripes in fashion. It’s like using red or black in fashion. If something gets too associated with one brand, it’s problematic to other brands.”
He pointed to the Christian Louboutin case where he has sued over the use of red on shoes. The court has found that the trademark is for the red sole only, not the color red itself.
Marco Bizzarri Is Staying Put at Gucci
Kering head François-Henri Pinault told WWD the executive would lead the next chapter for the brand.
Squelching persistent speculation of a management change at Gucci, François-Henri Pinault told WWD that Gucci’s longtime chief executive officer Marco Bizzarri would stay in place and lead the brand in the post-Alessandro Michele period.
Speaking on the sidelines of Gucci’s fall 2023 men’s fashion show in Milan on Friday, Kering’s chairman and chief executive officer was emphatic that Bizzarri “has my full trust. He already had.”
“It’s so obvious that Marco is the CEO for this next chapter of Gucci for sure,” he said, smiling broadly as he spoke to WWD. “I need him to build that with me and I’m fully confident that we will succeed on that.”
His remarks should further calm investor concern about further turbulence at Kering’s largest brand and its greatest profit driver.
The Bizzarri-Michele dream team helped triple the size of Gucci since 2015 to reach sales last year of 9.73 billion euros.
Michele suddenly exited his role as creative director of Gucci last November amid disagreement over the future of the brand, which Michele had energized with gender-fluid, retro-tinged glamour.
After Michele’s appointment in 2015, Gucci posted growth exceeding 35 percent for five consecutive quarters by the first quarter of 2018, prompting Bizzarri to set a 10 billion euro revenue target for the brand in June that year.
But the momentum recently stalled, and it is understood Bizzarri and Pinault had urged Michele to initiate a strong design shift, a quicker pace of collections, and a further elevation of the brand toward a true luxury positioning.
Michele’s successor has yet to be named, and the men’s collection shown Friday was credited to the design studio, which riffed on various brand codes with a soupçon of sailor and rock-star styling.
In a recent research note, Erwan Rambourg, global head of consumer and retail research at HSBC, said Gucci is likely to do better in 2023, with the worst behind it.
It forecasts a 12.5 percent dip in fourth-quarter revenues when the numbers come out on Feb. 15.
“The brand has lost market share following what, in hindsight, was likely a strategic mistake: cutting costs in the spring of 2020 while most peers were doubling down on spending. Separately, we believe the brand’s expression became a bit narrow which made it particularly vulnerable in mainland China, where the group has strengthened management recently,” the HSBC report said. “A renewed merchandising team should also ensure a more commercial approach.…The commitment to spend more in terms of advertising, combined with a stronger team in mainland China as well as in merchandising should help the brand converge towards peers’ sales growth regardless of the fact it will be in a transition period.”
Research Calls
- Upgrades:
- Air France-KLM (AFLYY) upgraded to Buy from Neutral at UBS
- Armstrong World Industries (AWI) upgraded to In-line from Underperform at Evercore ISI; tgt lowered to $80
- Carrier Global (CARR) upgraded to Buy from Neutral at Mizuho; tgt raised to $53
- Caterpillar (CAT) upgraded to Buy from Neutral at BofA Securities; tgt raised to $295
- Community Healthcare Trust (CHCT) upgraded to Buy from Neutral at Janney; tgt $44
- Copa Holdings (CPA) upgraded to Overweight from Neutral at JP Morgan; tgt raised to $132
- Farmland Partners (FPI) upgraded to Buy from Neutral at Janney
- ICON plc (ICLR) upgraded to Overweight from Equal Weight at Barclays
- OrganiGram (OGI) upgraded to Buy from Hold at Stifel
- Pentair (PNR) upgraded to Buy from Neutral at Mizuho; tgt raised to $60
- Timken (TKR) upgraded to Buy from Neutral at BofA Securities; tgt raised to $87
- TransUnion (TRU) upgraded to Overweight from Equal Weight at Wells Fargo; tgt raised to $88
- Vulcan Materials (VMC) upgraded to Outperform from Sector Perform at RBC Capital Mkts; tgt raised to $191
- Downgrades:
- Algonquin Power & Utilities (AQN) downgraded to Sell from Hold at Desjardins
- AutoNation (AN) downgraded to Equal Weight from Overweight at Wells Fargo; tgt $126
- AZZ (AZZ) downgraded to Hold from Buy at Stifel; tgt $48
- Casella Waste (CWST) downgraded to Underperform from Neutral at BofA Securities; tgt lowered to $81
- Corebridge Financial (CRBG) downgraded to Neutral from Outperform at Credit Suisse; tgt lowered to $23
- Costamare (CMRE) downgraded to Hold from Buy at Stifel; tgt lowered to $11
- Dream Finders Homes (DFH) downgraded to Underperform from Sector Perform at RBC Capital Mkts; tgt $8
- D.R. Horton (DHI) downgraded to Underperform from Sector Perform at RBC Capital Mkts; tgt raised to $76
- Evolution Mining (CAHPF) downgraded to Sell from Buy at Citigroup
- Fortinet (FTNT) downgraded to Neutral from Buy at BTIG Research
- Fortune Brands Innovations (FBIN) downgraded to Sector Perform from Outperform at RBC Capital; tgt raised to $63
- Gladstone Commercial (GOOD) downgraded to Neutral from Buy at Janney; tgt $17.50
- Hugo Boss AG (BOSSY) downgraded to Underperform from Neutral at BofA Securities
- Int'l Consolidated Airlines (ICAGY) downgraded to Neutral from Buy at UBS
- Jacobs Engineering (J) downgraded to Neutral from Buy at BofA Securities; tgt $137
- KB Home (KBH) downgraded to Sector Perform from Outperform at RBC Capital Mkts; tgt $34
- Lennar (LEN) downgraded to Underperform from Sector Perform at RBC Capital Mkts; tgt lowered to $76
- Lithia Motors (LAD) downgraded to Equal Weight from Overweight at Wells Fargo; tgt raised to $233
- Lockheed Martin (LMT) downgraded to Sell from Neutral at Goldman; tgt lowered to $332
- Mosaic (MOS) downgraded to Underperform from Neutral at Exane BNP Paribas; tgt $42
- Masonite International (DOOR) downgraded to Sector Perform from Outperform at RBC Capital Mkts; tgt lowered to $89
- NN Group (NNGPF) downgraded to Hold from Buy at HSBC Securities
- Northrop Grumman (NOC) downgraded to Sell from Neutral at Goldman; tgt lowered to $375
- Polaris Industries (PII) downgraded to Neutral from Buy at Northcoast
- Raytheon Technologies (RTX) downgraded to Neutral from Conviction Buy at Goldman; tgt lowered to $105
- Shaw Comms (SJR) downgraded to Sector Perform from Sector Outperform at Scotiabank
- Syneos Health (SYNH) downgraded to Underweight from Overweight at Barclays; tgt $25
- Shaw Comms (SJR) downgraded to Hold from Buy at Desjardins
- Sunlight Financial (SUNL) downgraded to Neutral from Outperform at Credit Suisse; tgt lowered to $1.60
- Tesla (TSLA) downgraded to Sell from Neutral at Guggenheim
- Warner Music Group (WMG) downgraded to Neutral from Buy at Guggenheim; tgt $35
- Wendy's (WEN) downgraded to In-line from Outperform at Evercore ISI; tgt $25
- Others:
- Advantage Oil and Gas (AAV) resumed with a Buy at Stifel
- Aon (AON) initiated with an Outperform at Credit Suisse; tgt $363
- ARC Resources (AETUF) resumed with a Buy at Stifel
- Birchcliff Energy (BIREF) resumed with a Buy at Stifel
- Canadian Natrl Res (CNQ) resumed with a Buy at Stifel
- Crew Energy (CWEGF) resumed with a Buy at Stifel
- Domino's Pizza (DPZ) added to Tactical Underperform list at Evercore ISI
- FormFactor (FORM) initiated with a Hold at Jefferies
- International Petroleum Corp (IPCFF) resumed with a Buy at Stifel
- Kelt Exploration (KELTF) resumed with a Buy at Stifel
- Overstock.com (OSTK) initiated with a Hold at Jefferies; tgt $20
- Pagaya (PGY) initiated with a Neutral at UBS; tgt $1.25
- Procore Technologies (PCOR) named Top Small-Cap Idea at Piper Sandler
- Peyto Exploration (PEYUF) resumed with a Buy at Stifel
- PrairaSky Royalty (PREKF) resumed with a Buy at Stifel
- Rapid7 (RPD) initiated with a Neutral at DA Davidson; tgt $34
- Summit Materials (SUM) initiated with a Buy at Truist; tgt $40
- Surge Energy (ZPTAF) resumed with a Buy at Stifel
- Tencent Music (TME) initiated with a Buy at Daiwa Securities
- Teradyne (TER) initiated with a Buy at Jefferies
- Tourmaline Oil (TRMLF) resumed with a Buy at Stifel
- Workday (WDAY) initiated with an Overweight at CapitalOne; tgt $200