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Looks like the ‘Avon lady’ is getting a pink slip stuffed in her stocking this year… Andrea Jung, the longest-serving female CEO of a Fortune 500 company, will continue to be chairwoman in 2012, but is relinquishing the role of chief executive. Avon Products (NYQ: AVP) has had a tough year under a series of bribery allegations, profit warnings and management challenges. Its profits are down 45% this year, compared to other direct cosmetic companies such as Nu Skin Enterprises (up 48%) and Herbalife (up 52%).
Meanwhile, Michael Kors’ family is looking forward to some stellar gifts from Uncle Mike this year… Shares in Michael Kors (NYSE: KORS) were launched on Wednesday night, in the biggest-ever initial public offering (IPO) in the world of American fashion. The deal was “oversubscribed” - meaning there was more demand for shares than they could accommodate. Shares were purchased at $20, above the expected $17-$19. On the first day of trading, the shares opened at $25, a hefty instant 25% gain for happy IPO investors. Although Mr. Kors’ personal ownership of the company was diluted from 11.7% to less than 9%, his company is now valued at nearly $4 billion – that’s just good math!
But not all was bright and sparkly for every IPO… Indeed, the world’s biggest jeweler failed to shine on its first trading day this week. Tiffany & Co (NYSE:TIF)? No. Harry Winston (TSX: HW)? Nope. The world’s top jeweler has shops only in mainland China, Hong Kong and Macao and yet it’s worth $19.2 billion (compared to second-largest Tiffany & Co at $8.5 billion). Chow Tai Fook went public on the Hong Kong exchange this week and raised $2 billion. Unfortunately, its plan was to raise $4 billion, but the shares sold at the bottom of their range due to a ‘meh’ level of interest, then dropped by 9% on the first day of trading.
So why would Michael Kors shine while Chow Tai Fook fades? There are several factors to consider – all of which Graff Diamonds is currently pondering as it plans to go public in the hopes of raising $1 billion to expand into Asia next year. First, Hong Kong has been the world’s largest IPO market for three years - partly because so many companies see growth opportunity in China and want more profile there; and partly because many Europeans find the market more attractive than their own faltering economies. This makes launching on the Hong Kong exchange more competitive – more choices for IPO investors to pick and choose from. Second, investors fear the Chinese economy is slowing and as a result, the Hong Kong Hang Seng index is down about 20 percent this year; as a result, most Asian stocks are suffering. Despite this, the luxury sector is pretty much unscathed by the surrounding global financial chaos and in the end (as Michael Kors proves), Americans are nothing if not optimists.
And finally, Christmas and Hanukkah came early for courier companies… This past Monday, FedEx (NYSE: FDX) delivered 17 million packages - the busiest day in its entire 40-year history! This is twice its average daily rate of shipments. Why? Online holiday shopping (yes, you late at night with your credit card). FedEx’s shares were up more than 5%, while its larger rival UPS also saw its shares rise 1.3%. FedEx is rewarding itself with the purchase of 27 new fuel-efficient Boeing (NYSE:BA) jets – and retiring a few dinosaurs that have been kicking around since inception. But before you feel all warm and fuzzy, take note: FedEx will raise its ground shipping and home delivery rates next year by nearly 5%, matching its 2011 increases. Boooooo...
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