Tuesday 20 February 2018

Valentine's Day shares: chocolates are sweet but lingerie is down

Thomas Molloy

IT can be fun giving cards, chocolates and lingerie on Valentine's Day but the pleasure is usually fleeting which led Sharescope to ask what would happen if readers gave their loved ones Valentine's Day shares instead.

Investing in traditional Valentine's Day presents is not easy but perhaps this is no bad thing as the few listed companies that produce these gifts have a life span no longer than the length of the average teenage crush.

It is almost impossible to invest in companies that make greeting cards. Hallmark, which makes around half of all the cards sold worldwide, is still owned by the Hall family while the company's nearest rival this side of the Atlantic, Clinton Cards, has been hammered by the credit crunch which pushed down operating profit by 42pc last year and forced the company's Birthdays chain to be placed into administration.

While the profit margin on cards must be massive, it seems that a piece of cardboard is one of those things consumers can happily cut out in a recession. Still, things maybe looking up for Clinton, the chain said in October that sales have risen 2.9pc and it repurchased 196 of the better-performing stores from the administrator for just £3.5m. Still, the shares are only around a quarter of their level 10 years ago -- suggesting that anybody receiving shares probably wishes they had got a simple Valentine's card instead.

Things are a little sweeter for chocolate companies. Anybody with shares in Cadbury, one of few listed companies which make most of their profit from chocolate, enjoyed a nice boost following the recent Kraft's takeover.

Kraft's final offer was at a 48pc premium to Cadbury's share price the day before news of the bid broke in early September and a 40pc premium to Cadbury's share price over the past two years.

While shares in Cadbury performed relatively well even before the recession, most of the high margins in the chocolate world these days tends to be found in small, unlisted companies making the sort of chocolate sold individually in upmarket shopping centres.

The big chocolate makers are not doing well as consumers worry about their waists. Shares in US-based Hershey, which produces pretty standard fare the other side of the Atlantic, have fallen 38pc during the past five years, compared with an 11pc drop in the Standard & Poor's 500 Index and a 10pc gain for the S&P's Consumer Staples Index.

While shares in a chocolate maker would not be a particularly good present for your Valentine, they would appear to be much better than lingerie stocks which crash and burn with alarming regularity.

Listed UK lingerie maker Intimas Group went into administration in July after a dreadful Christmas which saw losses at the maker of 'Ted Baker' lingerie chain rise to unsustainable levels.

Things appear little better among privately owned chains with La Senza, another High Street lingerie chain here and in the UK, being passed from owner to owner over the past decade as it struggles to make money.

Perhaps that's why they call them briefs. All in all, it would seem only the most enthusiastic accumulators of shares are likely to prefer a Valentine's Day addition to their portfolio than the real thing.

Irish Independent

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