Burberry: Mixed Results but Long Term Outlook is Positive

There was mixed news in Burberry's first-half results, but the Burberry brand is a source of superior economic returns and is hard for competitors to imitate

Philip Gorham 18 October, 2016 | 3:07PM

Luxury retailer Burberry Group (BRBY) reported a revenue decline of 4% in the first half of the year, although the continued weakness in sterling is boosting growth. Wholesale and licencing sales declines drove the revenue contraction, but a significant improvement in comparable retail sales is encouraging. We are reiterating our £15.50 fair value estimate for the shares, and we believe the sell-off on today's news offers a modest amount of upside to the share price.

Positive performance in the U.K. and China is a sign of brand resilience

There was mixed news in Burberry's first-half results. On the one hand, the wholesale business, which represents about one fourth of the total business, was weak, and the decline of 14% was below our expectation of a decline of around 10%. On the other hand, comparable store sales rebounded materially from down 3% in the first quarter to up 2% in the second, leaving first-half comps unchanged over the year-ago period.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Burberry Group PLC1,356.00 GBX-0.91

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Philip Gorham  

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