Benetton Shares Receive Tepid Response in U.S.
NEW YORK — Benetton Group SpA, the Italian apparel retailing group, floated its first U.S. shares Friday, but they received a surprisingly lukewarm response, due in part to concerns about lawsuits brought by some franchise owners.
The lawsuits, which are several years old, stem from Benetton’s rapid expansion in the United States, which puts pressure on profit margins, they said.
“People think Benetton may have reached a saturation point,†said one foreign equities trader. “There are stores on every corner. It was overkill.â€
The retailer, which specializes in its own line of sweaters and other casual clothing, had 700 stores in the United States at the end of last year and 4,860 stores worldwide.
A Benetton spokeswoman said a number of store owners, most of whom had defaulted on payments to the company, had contended in bankruptcy and other court proceedings that Benetton had engaged in unfair trade practices and violated franchise agreements and other regulations. She did not elaborate.
The retailer listed its American Depositary Rights on the New York and Toronto stock exchanges Friday, with each ADR representing two ordinary shares. ADRs are U.S. securities that bundle together a number of shares. They are often used in order for Americans to own stock in foreign companies.
Benetton shares closed at $14.50 on the New York Stock Exchange, below the offering price of $14.95.
“They had high expectations, but it didn’t go well,†said Sandor Cseh, Provident Capital Management senior vice president of international investments.
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