Finimize - 👗 Clothing giant’s H&M-fisted results

Porsche IPO is Europe’s biggest in a decade | H&M posts disappointing results |
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Hi Reader, here's what you need to know for September 30th in 3:11 minutes.

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Today's big stories

  1. Porsche burst onto the scene with a long-awaited trading debut
  2. Find your investment footing when everything seems to be sliding – Read Now
  3. H&M, the world’s second-biggest clothing retailer, reported plunging profits

Porsche Drives A Stock Shift

Porsche Drives A Stock Shift

What’s Going On Here?

Porsche made its hotly anticipated trading debut on Thursday.

What Does This Mean?

As motorists everywhere know, a Porsche can turn heads like nothing else – a principle that also seems to hold true for shares. With stocks in a never-ending slump, and initial public offerings (IPOs) in Europe raising paltry sums that recall the dark days of ‘09, it looks like a bad time for new stock market listings. But not if you’re Porsche. When Volkswagen listed a 12.5% stake in the sports car company on Thursday, investors didn’t hold back: demand was so strong that shares hit the top of the initial pricing range, helping the company raise over $9 billion and valuing Porsche at around $73 billion. That marks the single biggest IPO in Europe in a decade – good news for Volkswagen, which plans to re-invest the funds as part of its lofty electric vehicle push.

Why Should I Care?

For markets: Not the prince of pop.
Porsche’s shares rose by 3% when trading started – bucking the trend of Germany’s DAX (a key German stock index), which fell on Thursday. But some analysts were disappointed they didn’t rise more, with the coveted “pop” that’s characterized many high-profile listings in recent years. It could be that even Porsche can only shine so brightly against the current dim economic backdrop.

The bigger picture: Porsche outshines its own parent.
This listing gives Porsche a valuation close to that of its own parent company, which is made up of Audi, Skoda, Seat, and the VW brand itself, among others. That may sound strange – but it makes sense given that Porsche’s electrification progress is miles ahead of the other brands’. (Its first foray into electric sports cars is already outselling its flagship 911.) Add its healthier profit margins and legions of die-hard fans to the mix, and suddenly Porsche’s unique valuation starts to seem more sensible.

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Analyst Take

How To Invest When Everything Looks Ready To Fall

How To Invest When Everything Looks Ready To Fall
Photo of Stéphane Renevier

Stéphane Renevier, Analyst

When there’s this much red flashing in the markets, part of you may think it’s best to stay away at all costs.

But the other part has got to be thinking: there are assets here that my future self will thank me for buying today.

There probably are. If you’ve got a long-term horizon and money to invest, you should scrutinize every price fall as a possible opportunity.

That’s today’s Insight: how to invest when the market is mostly flashing red.

Read or listen to the Insight here

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In this market, we think you’re going to want to strap on a Modern Investor Toolkit – that’s why we’re giving one away for free.

Be one of the first 500 to sign up for a free summit ticket between today and midnight Sunday. You’ll have the chance to win this giveaway to help you become a successful investor in 2023. The Modern Investor Toolkit includes:

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H&M’s Losing Its Shirt

H&M’s Losing Its Shirt

What’s Going On Here?

Fashion retailer H&M reported falling profits on Thursday.

What Does This Mean?

When Inditex reported bumper revenue and profit growth earlier this month, H&M probably suffered an attack of the green-eyed monster. See, the Swedish firm has been setting ambitious targets lately – like its plan to double sales by 2030 – and to hit them, it was going to need stellar results like those Inditex posted. Alas, no dice: last quarter H&M, the world’s second-biggest retailer, reported falling sales and a seriously underwhelming pre-tax profit. And that’s not because people have stopped wearing clothes: the likely culprits are H&M’s wind-down of business in Russia – that alone caused half the drop in profits – and the fact the company’s taking higher costs on the chin, raising its prices less than many competitors have.

Why Should I Care?

For markets: H&M’s going ham.
Unsurprisingly H&M’s stock fell after the news broke, meaning its shares are down 43% this year and underperforming arch rival Inditex by close to 20%. Now, the firm’s going to want to make up that lost ground as soon as possible, which might explain why it plans to cut costs by $180 million a year going forward. And there have been some other good omens: demand improved as the quarter drew to a close, and its fall collection – yes, sweater weather already – has seen sales grow healthily so far this month.

The bigger picture: Things could change.
The fact H&M’s been swallowing increased costs and keeping price hikes lower for customers could pay off in the long term. See, H&M does most of its business in Europe – and data out on Thursday showed economic confidence in the region has fallen to its lowest since 2020 this month (tweet this). So, with record inflation, currency upheavals, and the prospect of a cold, expensive winter spooking many Europeans, H&M’s cut-price strategy could still turn out to be a success.

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💬 Quote of the day

“Love much. Earth has enough of bitter in it.”

– Harold Bloom (an American literary critic)
Tweet this
🤔 Q&A · RE: When Russia Acts, The Euro Falls

Q: “Why is the USD appreciating so much when US bonds are falling in value?”

– Nicolas from Singapore

A: “Hey, Nicolas! So, the main reason the US dollar has been appreciating so much is that the Federal Reserve has increased interest rates more aggressively than other central banks. And since higher rates make a currency more attractive, international investors have piled into the dollar and sent it surging relative to other currencies. At the same time, those higher rates make existing bonds less attractive – prompting investors to sell them and causing their prices to fall. What’s more, the Federal Reserve has been reducing its holdings of the bonds it’s accumulated over the years, which pushes their prices down even more.” 

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🎯 On Our Radar

  1. Master your métier. Become an expert, whatever your field.
  2. Buying a home just got easier. Well, at least if you’re an investor.*
  3. Hiphop’s joyous, creative, and fun. But asking it for politics might be a step too far.
  4. Summer’s well over. But the season’s overhyped anyway.
  5. Dinner parties can be fraught. Here’s how you’re annoying the host.

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