Interactive Investor

ii view: Burberry awaits masterplan from new CEO

27th May 2022 12:03

Keith Bowman from interactive investor

Shares for this luxury brand retailer are down around a fifth over the last year. We assess prospects. 

Full-year results to 2 April

  • Revenues up 21% to £2.82 billion
  • Operating profit up 4% to £543 million
  • Final dividend of 35.4p per share
  • Total dividend for the year up 11% to 47p per share
  • New £400 million share buyback programme

Chief executive Jonathan Akeroyd said:

"Burberry is a unique British company with an extraordinary history and heritage and it is a privilege to take the reins in this next phase. The company has made great progress over the last five years to elevate the brand, product and customer experience into the luxury space. I look forward to setting out my plans for building on these strong foundations and accelerating growth at the interim results in November. "

ii round-up:

Founded in 1856 by Thomas Burberry, today the company has become a global luxury brand with annual sales approaching £3 billion. 

Burberry (LSE:BRBY) sells a range of clothing including outwear and leather goods. Its retail outlets as of early April numbered 218 stores, 143 concessions, 57 outlets and 38 franchised stores. 

For a round-up of these latest results, please click here.

ii view:

Following on from previous initiatives, Burberry continues to revamp its stores and build on digital innovation. During the year it upgraded 47 stores to its new design, 39 of which were in Asia, including 17 in South Korea and 13 in mainland China. Key new store openings included three new flagship stores, with one in London’s Sloane Street, one in Paris and a third in Shanghai China at Plaza 66. A total of 38 new stores were opened during the year and 35 closed. Digital initiatives include marketing via social media channels including both Instagram and Tik Tok. 

For investors, Western tensions with China are worth remembering given the importance of Burberry's Asian business. Its store numbers in the Asia Pacific region account for just over half of its overall portfolio. Tourism in Asia remains impacted by the ongoing pandemic, while its share performance continues to lag other luxury related brands such as Watches of Switzerland Group (LSE:WOSG). Burberry shares are down by around a fifth over the last year compared to a gain of more than 15% for this luxury watch retailer.  

More favourably, some recovery in sales is being seen, with fourth-quarter comparable store sales up 7%. New chief executive Jonathan Akeroyd could add renewed vigour to strategy and performance, while an estimated future dividend yield of over 3% is not derisory in an era of still low if rising interest rates. In all, and while some caution remains sensible given a still clouded outlook, an estimated analyst consensus fair value share price of over £19 does at least offer some scope for optimism over the longer term.  

Positives: 

  • Product and geographical diversity
  • New £400 million share buyback programme

Negatives:

  • Some tourism still hindered by the pandemic
  • Currency movements can provide headwinds

The average rating of stock market analysts:

Hold

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