You Want to Be in Hard Luxury for 2014: Mack

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Jan. 15 (Bloomberg) -- William Mack, Consumer Equity Analyst at S&P Capital IQ, discusses luxury retailers outlook for 2014 on the back of Burberry's Q3 sales and his subsequent investing strategy. He speaks on Bloomberg Television’s “On The Move.” (Source: Bloomberg)

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Ok.

yeah.

I think they are making it and a lot of it is coming out a franchise business and they're taking it under ownership, rather than franchise.

It is a margin that is not different than the company margins.

That is a lot of it and for a number of years, burberry had pretty good sales growth and pretty good store growth, in terms of count.

The problem, as we see it, is that keeping and getting the margins to where they were in 2007 or 2008. we talk a lot about technology with burberry.

They digitally advanced and we know all the pluses.

What are they not doing 100% in your view?

I think they are blocking and tackling.

More strongly enforcing the branch and not necessarily trading higher sales for lower margins.

We like their growth and we would rather see it in more profitable and higher-margin areas.

Some of the other names, half of their sales come from the big goods and the outerwear.

These are the teachers that are selling the most.

We are looking at the overall picture and their margins are the lowest in the industry.

They are much lower than swatch.

Even lower than m and h. what do they need to do?

What are they going to do to resolve that?

Well, one-time items, if you will, in the first half, they saw margins decline and we do not see that kind of decline in the second half of the year.

We see a wide decline in currency and supply chain issues that they have.

They are not finding any way to offset those and the margins are going to be down stop it is a question of how much.

What is your favorite?

You cover them.

That order.

The other three that are non- burberry, we have eyes on.

For me, it is a mystery.

You think of the six flags and the plastic watches and they have high end watches.

If i buy a watch what am i buying?

A lot of people share the same perception as you of swatch.

In fact, swatch is just a small part of their products and all they did is watches.

They make 100 million in profits in frank's. -- francs.

China slows down and the gifting process slows down hard and soft luxury, where is your view, in terms of china and where does that translate with hard and soft.

Where do i want to be?

You want to be in the hard luxury and that is where our luxury recommendations are more biased.

We like it because they are not doing it well with the stores.

They are doing it well with traditional jewelry and making expenses with manufacturing on watches and, you know, swatch keeps putting investment assets into manufacturing, themselves.

It is why they dominate that.

Thank you so much.

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