Burberry shares feel benefit of 'brand heat'
23rd January 2019 11:05
by Richard Hunter from interactive investor
It's outperformed this past year, but our head of markets tells us what's really going on at Burberry.
The rejuvenation of the iconic Burberry (LSE:BRBY) brand is still in its early stages, but there are clear signs that the new management team is taking the bull by the horns.
Initial reaction to these third-quarter results was negative, with the shares down 3% at the open, but buyers chased them higher and by late morning they'd broken into positive territory.
Quite apart from confirming both the outlook and that the £100 million cost savings plan is on track, the company has been busy spreading the word on social media around some new collections and collaborations.
Burberry is particularly optimistic on the launch of the new Riccardo product lines next month, and the building of "brand heat" appears to have been successful so far. Equally reassuring is that the key Chinese market is continuing to display good growth, despite the current broader concerns around the potential slowdown within that economy.
Source: TradingView (*) Past performance is not a guide to future performance
Less positively, total retail revenues dipped slightly, whilst the Americas business suffered from softer footfall. Meanwhile, growth in Europe, the Middle East, India and Africa was pedestrian and the scale of the planned transformation at Burberry inevitably comes with implementation risks.
In the meantime, the dividend yield of 2.3% is not of particular attraction, and whilst there are clear objectives in mind on the company's rebrand, this has yet to filter through to the numbers in any meaningful way.
Although more recently the share price has been under pressure, dropping 17% over the last six months, the picture over the last year is much brighter. Burberry's shares have risen 11% over that period, significantly exceeding the wider FTSE 100 index, which has dropped 11%.
Given this outperformance, and whilst investors await further details on the transformation plan, the shares are being seen as up with events, with the market consensus coming in at a 'hold'.
*Horizontal lines on charts represent levels of previous technical support and resistance. Trendlines are marked in red.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.