9/11/2012
By David Urani

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Today Burberry rocked the luxury world after a big warning about full-year profits. The stock made its biggest drop ever in London trading, down 21%. For Burberry it was the second warning in two months, indicating that the company is really hitting a rough patch now. A lot of that may come down to the simple fact that their assortment isn't hitting the right notes with consumers; certainly there are better performers in the space right now. Nevertheless, the CFO states that lately the luxury goods market in general is taking hit. They also say that it sales growth went negative in the last two weeks, broad-based in all regions. That said, a lot of it has to do with a slowdown in Chinese consumer spending.

It's hard to say just how much of the weak guidance comes down to Burberry itself versus the high-end fashion market as a whole. Nevertheless, the market isn't taking any chances. Related names including Coach (COH), Fossil (FOSL), Sotheby's (BID), Saks (SKS), Michael Kors (KORS), Ralph Lauren (RL), Fifth & Pacific (FNP), Vera Bradley (VRA) and Tiffany (TIF) are taking hits.

David Urani
Wall Street Strategies