ii view: Burberry sales exceed forecasts

by Keith Bowman from interactive investor |

Luxury brand retailer Burberry is undertaking a 'multi-year journey', and the shares are flying.

First-quarter trading to end of June 2019

  • Total retail revenue up 4% to £498 million
  • Comparable store sales up 4% from 3% in Q1 2018

Chief executive Marco Gobbetti said:

"This was a good quarter in our multi-year journey to transform Burberry. We increased the availability of products designed by Riccardo, while continuing to shift consumer perceptions of our brand and align our network to our new creative vision. The consumer response was very promising, delivering strong growth in our new collections. We are on track with our plans and we confirm our outlook for FY 2020."

ii round-up:

Founded back in 1856 by Thomas Burberry, today the company has become a global luxury brand with annual sales of over £2.7 billion. Its retail outlets at the end of June 2019 numbered 230 stores, 147 concessions, 51 outlets and 44 franchise stores. It also runs wholesale and licencing businesses. 

In order to revitalise its iconic brand, Burberry Group (LSE:BRBY) has begun a multi-year transformation plan. A drive towards digitalisation is underway, its stores are being revamped and, for the most part, it is exiting its non-luxury lines. 

For a round-up of the first-quarter trading update, please click here.

ii view:

Burberry offers investors the chance to buy into an iconic luxury British brand. The group's transformation plan is attempting to finesse the way in which its customers can buy its adjusted product range, while also keeping its prized brand name highly polished. 

From an investor's prospective, potential shareholder returns prove a point of interest. The company's current cash balance of over £800 million is yet to be fully utilised. Tentative signs of early success for the transformation plan – Q1 sales exceeded analyst forecasts – offer hope, while exposure to Asian and Chinese consumers is not to be forgotten. However, full-year guidance was left unchanged, offering an insight into management confidence, at least for now. 

Positives: 

  • Asia Pacific sales up by a high single-digit percentage. Mainland China up mid-teens
  • Net cash of £837 million at 30 March 2019
  • Announced £150 million share buyback at full-year 2018 results

Negatives:

  • North American sales flat
  • Brexit and the US/China trade spat could yet impact
  • Full-year 2018 revenue flat. Adjusted operating profit down by 6%

The average rating of stock market analysts:

Hold

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.

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