Merrill Lynch cut Tropical Sport (TSIC), Liz Clairborne (LIZ) and Jones Apparel Group (JNY) to neutral.
Analyst Virginia Genereux says she downgraded based on the macroeconomic backdrop and possible consumer deceleration in 2003. She notes the brands' exposure to the mid-tier department store channel, where share loss has accelerated. Also, Genereux cited branded apparel's need for top-line growth to drive continuing earnings per share growth. She says Tropical Sport is less exposed to traditional department stores, but says Levi's has moved to provide retailers with lower wholesale prices and more promotional support.
Genereux cut Tropical Sport's $1.89 fiscal 2003 (Sept.) earnings per share estimate to $1.79, and cut the $2.23 fiscal 2004 estimate to $2.11; she cut Liz Clairborne's $2.19 2002 estimate to $2.17, and trimmed Jones' $2.78 2002 estimate to $2.70.