The long-term rebound in the price of carhartts is being misconstrued by some as a sign of the strength of the Australian economy, according to analysts.
Carhartt’s collapse has been accompanied by the loss of some of its best-known brands, including its coats.
The collapse of the company’s long-running coats business, the RSPCA and the Ropeway, has been widely reported in the media.
In a recent report to investors, analysts from Nomura Research, which has been tracking carharttons, predicted the long-lasting fall in the prices of Carhartts products would be a one-off, but analysts were sceptical about the rebound that could follow.
Nomura Research chief economist Simon Kiewi said the collapse of Carhops coats business was “bogUS”, adding that while the collapse was “a major concern” for investors, it did not mean the Australian consumer was facing a crisis.
“The collapse of RSPC was also a major concern,” he said.
“As a result, the Australian market may not see a significant rebound in consumer spending in the first half of next year.”
While this may not be a major risk for the Australian domestic economy, it may be a concern for the rest of the world.
“In its latest report to shareholders, Carhartt said the loss in the value of the carhartton business would be offset by the gains from the sale of the RRP coat business.”
It is possible that some of the short-term weakness in the Australian carhartT business is a result of the loss or restructuring of the brand,” it said.”[The loss] may also be due to a change in market perception of the value proposition of the brands and the need for a significant increase in marketing spend, particularly for the ROPeway brand.
However, the overall outlook for the long run is positive.”””
The decline in the long term growth of the stock, as well as the impact of the ongoing legal proceedings in Australia, will impact the long to mid-term outlook of Carhandts shares,” Nomura wrote.
“However, the overall outlook for the long run is positive.”
“The market’s expectations for the return of the growth in carhandt share prices are positive, with expectations for future growth in the share price forecast to be positive,” Nomuros analysts wrote.
The company’s financial woes have been exacerbated by its collapse of its coat business, which is a significant part of the business.
It was not immediately clear what the long lasting impact of this business loss will be on Carhartton’s ability to operate.
“Carhartts coat business is also suffering a loss as a result in its legal proceedings,” Nomurates analysts wrote, adding that the company “will be forced to re-examine its coat strategy as it looks to minimise the risk of the collapse in its coat product sales and/or its ability to continue to generate cash flow”.
“The costs associated with the legal proceedings could further impact the short term financial position of Carhardts,” they wrote.NOMURA Research’s research director and chief economist, Simon Kowi, said there was no indication that carhart tins were a major contributor to the collapse.
“There’s no evidence that the collapse caused a significant impact on Carhandt shares,” he told AM.
“In fact, the collapse did not lead to a major impact on the company,” he added.
“For the most part, the company has been performing reasonably well for the past year and a half, but this has been overshadowed by the legal and regulatory fallout.”
The Australian Competition and Consumer Commission has been investigating Carharts coat business since it emerged last year that it was a subsidiary of global multinational company LVMH, and it has taken the company to court over its relationship with LVMh.
It has also launched a probe into Carhart touts claims that they were unfairly paid by consumers.
“Nomuros is not able to comment on the ongoing proceedings of Carholts coat company, but it is clear that Carhart’s coat business has been suffering a significant loss of cash flow,” the agency said in a statement.
“We continue to monitor the ongoing and ongoing legal and regulation proceedings and will provide a further update when the relevant matters are resolved.”