market folly

Rahul Sharma of Neev Capital recently sat down with Bloomberg Television to talk about consumer trends, emerging markets, and retailers like H&M and Zara.  We wanted to flag this interview as Sharma is on our recently released alpha list of the top finance people to follow on Twitter.

He says that Hennes & Mauritz (HMSB), known as H&M, is a turnaround story as the company 'gets its mojo back' because they had dropped the ball in terms of pricing and they've struggled in Europe where the economy has been problematic.

To curb this, the retailer has focused more on fashion and to be more conscious about price.  Sharma points to the company's geography as very compelling.

Sharma sees Zara as an even bigger winner than H&M.  Zara falls under the Inditex (IXD) umbrella of brands.  We've noted that Steve Mandel's hedge fund Lone Pine Capital has held a stake in Inditex.

It seems as though traditional 'popular' brands in emerging markets such as Esprit have been supplanted by the likes of fast fashion movers such as H&M and Zara.  Esprit seems to be struggling as both the CEO and CFO left within a month of each other.


Retail in Emerging Markets

One of the trends many hedge funds have been playing is the rise of the emerging market consumer.  Sharma touches on this by noting that these consumers are very aspirational so premium retail brands do well in these environments. 

He says that pricing power is high and barriers to entry are high, mentioning Richemont (RITB) as a big player with their Cartier brand.  Louis Vuitton Moet Hennessey (MC) also comes to mind.

The Neev Capital man thinks the mainstream retail market does well in emerging markets due to the rising wage dynamic, and he also feels that premium brands do well due to the wealth effect.


Embedded below is Sharma's video interview with Bloomberg: