International luxury demand is in danger.
We’ve touched on the theme of international weakness multiple times in the past 2 months. Dan has used IBM and NKE put spreads to play international demand weakness. More recently, he initiated the SBUX put spread partly due to their high expected international growth rates going forward.
We don’t like the looks of emerging market demand, especially high-end emerging market demand. Look at the price action in names like TIF (our post about it from May) or COH if you’re excited about luxury demand in emerging markets. My CotD post from 2 weeks ago highlighted the weakness of emerging market economic data.
As usual, this theme got me thinking about potential stocks that might be affected, but had not yet reacted. What about American Express? Sure, the name is about as American as you can get. And American Express has 65% of revenues from the U.S. But where’s the growth? As usual, not from the U.S.
So how has AXP performed vs. luxury retailers like COH and TIF in the past year?
Even COH, which is also gets about 2/3 of its revenues from the U.S., has shown significant weakness in the past 2 months. AXP is a picture of strength in the face of a weakening luxury retail market. Looks like it has some catching up to do.