Monday, September 4, 2017

Reading the Tea Leaves at the FH

In fairness, July's numbers were posted a little while back, but I wanted to take a little time and really think about what these numbers might really mean.
Courtesy of the FH
Now to be completely fair, the graph is definitely heading north.  And in principle, that is really good news because the export numbers have been so stinky for so long.

And while the uptick in the export numbers would be welcome in any situation, there are still a few factors that continue to be ignored, or at least not really discussed.

While the export numbers continue to climb, the actual sales numbers being reported by retail store operators continues to run contrary to this increase.  

Another point of curiosity is the drop off of a few recently strong market places.  The UK is dramatically down with an -8% decrease.  And Italy, that convenient dumping enclave just across the line from Lugano?  A fairly serious drop-off of -14.3%.

Also interesting to relate, Hong Kong and China are both up dramatically.  But with more and more companies replacing CEOs, brand managers and sales reps?  It all points back to the same inescapable reality - the actual sales numbers do not match up to the increase in exports.

About a year ago, a good friend of mine who knows about these things predicted that we would see something like this - in his words, something akin to "a tsunami of grey market product" sloshing around the parallel markets owing to the need to liquidate all of the existing stock that would not pass muster under the new "Swissness" codes.  This would explain the very sharp upticks in exports.

To some extent we could look at the numbers in any light and come up with reasons for positive or negative feelings.  But there are a few inescapable truths that keep looping back.  Brands continue to make cuts, advertising spending has clearly dropped and shows no signs of coming back this year, and more and more talented people are being let go, and not being replaced.  And if the whispers are to be believed, we may see some more brands join others in the deep sleep of a coma patient that has been removed from life support, but the brain has not fully received the message that the body is dead.

The good news?  If brands continue to toe the line and keep production down, once the current flood of grey market merchandise is flushed through the system, then the sales numbers might stabilize.  

We shall see, stay tuned!

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