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Giordano buy spree confusing observers

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Few stocks draw such mixed reviews as Giordano. The one-time darling retailer has lost favour with the investment community after a host of misleading statements about its troubled China business.

Shareholders got a further shock with the announcement of a $93 million fine for breaking mainland customs regulations. The company had warned of a penalty, but few reckoned on it being so large.

Management has played fast and loose with the firm's credibility over the last year. Now it is engaged in a share buy-back programme after initiating the action a few months ago. Yesterday it apparently continued the buying spree.

At 11 times prospective 1997 earnings, with at least $200 million cash on hand, the company sees the stock as deeply over-sold. Presumably no deal with a mainland party is imminent given the buy-back programme.

Still, there are those who say the stock is over-valued at present levels. As long as existing management remains, a deal with Chinese parties is out of the question, they argue. Adding to its woes is diminishing market share due to competition from low-end, bright-and-breezy apparel retailers in major markets such as Taiwan.

HSBC James Capel maintains a speculative buy on the company in the event of a possible takeover bid. Remember, Giordano has no controlling shareholder these days.

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