Burberry Upgraded by Analysts

Demand for luxury products is linked to GDP growth and an increasing number of wealthy and middle-class people. In the longer run, growth should come from China

Morningstar Equity Analysts 21 September, 2017 | 4:02PM

Through strong execution, Burberry (BRBY) has transformed from an essentially licensed/wholesale business model with inconsistent regional product and brand presentation into a strong monobrand luxury player with consistent message, good control over distribution, and a global presence.

Burberry is the category leader in its trench coat business, enabling it to generate high operating margins in this category through scale and pricing power. It benefits from a high degree of control over distribution, which allows it to correct operational mistakes more quickly, showcase the brand in key locations in global capitals, avoid excessive discounting, and retain stronger negotiating clout with wholesale partners.

Burberry was one of the first of its peers to invest in digital front- and back-office systems. It aggregates customer data across channels and regions, which helps it to target marketing campaigns better and can act as an input in product development and merchandising. While demand for luxury products is linked to GDP growth and an increasing number of wealthy and middle-class people, we believe Burberry and its leather goods and apparel peers could engage the existing customer pool to purchase more through product innovation.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Burberry Group PLC1,488.00 GBX0.34

About Author

Morningstar Equity Analysts  Morningstar stock and fund analysts cover 2,000 mutual funds, 2,100 equities, and 300 exchange-traded funds.

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