ii view: is Burberry's sales growth impressive enough?

A reset strategy, a return to dividend payments and a pending new chief executive. We assess prospects. 

First-half results to 25 September

• Revenues up 38% to £1.21 billion
• Operating profit up 135% to £207 million
• Interim dividend of 11.6p per share (Nil: H1: 2020)
• Share buyback programme of £150 million

Chairman Gerry Murphy said:

"We have made strong progress in the half. Full-price sales are growing at a double-digit percentage, driving margin expansion and strong free cash generation. We are seeing an acceleration in performance in countries less impacted by travel restrictions and we remain confident of achieving our medium-term goals. 

“I would like to thank Marco Gobbetti for his vision and leadership of Burberry's transformation. We are very excited that Jonathan Akeroyd is joining as our new CEO in April to build on the strong foundations to accelerate growth and deliver further value for our shareholders." 

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 billion. 

Burberry (LSE:BRBY) retail outlets at the September 2021 year end numbered 218 stores, 145 concessions and 56 outlets, including 42 franchise stores. Retail provides its main distribution channel at 80% of sales, wholesale a further 18% and licensing the balance. 

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

ii view:

Under new management, Burberry began a multi-year transformation plan in late 2017. This included revamping its stores and driving digitalisation though initiatives such as enhanced social media. Now, having completed the plan, brand elevation remains core, with the new chief executive Jonathan Akeroyd due to take the helm.  

Geographically, just over half its stores, concessions and outlets are located in Asia, with a further 27% across Europe, the Middle East, India and Africa; and the balance within the Americas. Accessories account for its biggest slug of sales at just over a third, followed by women's clothing and menswear at a little over a quarter each and children’s and others making up the balance.

For investors, Western tensions with regards to China are worth remembering. A slowdown in comparable retail store sales of up to 6% in Q2 from up 37% in Q1, largely due to its Asia Pacific region, injected some caution. Regional pandemic lockdowns in China appear responsible. Medium-term guidance was left unchanged, potentially disappointing some. 

But while a forward dividend yield of over 2% is nothing to shout about, it is not completely derisory in the current ultra-low interest rate era. The growth in full-price sales also offers encouragement and a £150 million share buyback programme suggests management confidence in the outlook. In all, and given both geographical diversity and a reset strategy, investors may be inclined to stick with this highly established brand for the long-term. 

Positives: 

• Brand strength attracting new and younger customers
• Dividend payment previously restarted

Negatives:

• Pandemic uncertainty
• Currency movements can provide headwinds

The average rating of stock market analysts:

Buy