All is not well in the lap of luxury.
PPR, the french conglomerate which owns several luxury brands, hit a rough patch in the market yesterday, when Morgan Stanley downgraded the stock because of concerns regarding their Gucci and Puma units, Bloomberg is reporting.
Morgan Stanley said they worried Gucci would underperform luxury peers in 2012 and that the "continued challenges at Puma" would affect profitability. Apparently, Gucci's revenue growth slowed in the fourth quarter, while Puma may need further investment to regain a competitive stance in the market.
The stock price fell as much as 2.8 percent to 123.25 euros, the lowest intraday price since Feb. 23--and experts say that it could fall even more if Gucci and Puma don't get their act together. "The shares will struggle to outperform until we see clear signs that PPR is progressing towards its long-term vision of becoming a luxury/lifestyle conglomerate and overcoming the challenges to making a faster exit from the slow growth and low margin non-core retail assets,” Louise Singlehurst, an analyst at Morgan Stanley in London, told Bloomberg, after lowering the stock's rating from equalweight to underweight. Yikes.
Well at least if all goes Gucci's way in the lawsuit against Guess, the company could have an influx of $221 million dollars coming their way...