Burberry: Another disappointing update

Online helps boosts sales and margins, but can weaken image

When the operational highlights of a Q3 trading statement reiterate the multi-year turnaround plan you presented in November alongside an ugly profits warning (“margins won't grow until 2021”), there's a good chance that the growth figures and outlook will disappoint. And so we find Burberry shares 7% offside this morning, breaching multi-month lows to trade levels last seen in late July.

Burberry: Another disappointing update

Burberry: Another disappointing update

Mike van Dulken, Head of Research at Accendo Markets, commented this morning:

When the operational highlights of a Q3 trading statement reiterate the multi-year turnaround plan you presented in November alongside an ugly profits warning (“margins won’t grow until 2021”), there’s a good chance that the growth figures and outlook will disappoint. And so we find Burberry shares 7% offside this morning, breaching multi-month lows to trade levels last seen in late July.

Reiteration of FY 2018 profits guidance (margin improvement at constant FX, highly cash generative) looks like a failed attempt to curry favour with investors who have already seen the shares rally 28% post-referendum, only to drop 15% in November and struggle for traction since. In fact, today’s breakdown may have triggered a bearish flag towards last year’s lows of 1545p (-7%).

Q3 underlying retail sales +1% was well down on H1’s +5%. Comparable store sales +2% slowed from +4% in H1 and missed a perhaps optimistic 4% consensus estimate. Reported retail sales -2% also pale in comparison to the 10% gains reported for H1.

Of note is UK retail sales growth down by high single digits, although it did face a tough comparable. EMEIA growth fell by low single digits. Growth in the US – its biggest market – was flat. A 1% negative impact from new space is also a blot, along with persistently negative key tourist spending and only a very marginal marginal reduction in tax rate from 2018 thanks to US tax reform.

Quoted savings of £60m are always good to hear and will help margins, however, this just isn’t cutting it. Growth led by Asia Pacific is also a positive given the growing affluence of the demographic. However, mobile representing 40% is an issue for a brand that sits somewhere between fashion and luxury. Online helps boosts sales and margins, but can weaken image. The brand also loses its lustre without an expensive bricks-and mortar presence.

Burberry & Equity Release

What Is Equity Release?

Equity release is the use of financial arrangements that provide the owner of a house, or other property, with funds derived from the value of the property while enabling them to continue using it.

How Does Equity Release Work?

Equity release is aimed at homeowners aged 55 and over. It allows you to take some of the value of your home as cash.

Equity Market value of Equity Release

The total value of equity released rose by 18.8% from nearly £884m in the third quarter of 2022. The equity release market is on course for a record year after customers took out just over £1bn in property wealth in the three months to the end of September, data from equity release adviser Key shows.

Editorial Note: This content has been independently collected by the EveryInvestor advisor team and is offered on a non-advised basis. EveryInvestor may earn a commission on sales made from partner links on this page, but that doesn’t affect our editors’ opinions or evaluations. Learn more about our editorial guidelines.
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