Up until very recently, Burberry Group shares had been having a pretty solid 2019, one that was admittedly much need after it collapsed in the second half of last year.
Opening at £17.30, the high end fashion retailer had climbed to £20.40 for the first time in 7 months at the start of May, only for the renewed trade fears – the company is exposed in many ways to China, and is especially reliant on its wealthy citizens – to drag it back to a current trading price of £19.05 .
Broadly aiding the stock’s performance was January 23rd’s Q3 update. Though the release was initially marred by its warning that a no-deal Brexit would cost the firm ‘tens of millions of pounds’, alongside a 2% decline in retail revenue, eventually investors focused on the more positive aspects, like a 1% increase in comparable store sales (though that was half of the 2% posted for the same period the year previous).
Perhaps most importantly, it mentioned that like-for-likes were up ‘mid-single digits’ in Mainland China, a relief given concerns about growth in the country. America, however, was impacted by ‘softer footfall trends’.
Arguably the fourth quarter is going to be the real test for Burberry, with that period covering the launch of Riccardo Tisci’s debut collection as creative director. Analysts are expecting like-for-like sales to rise 2% during Q4.
As for the full year, group revenue is expected to be effectively flat at constant exchange rates, with an overall comparable sales increase of 2%, and a 5.4% slide in adjusted operating profit to £442 million. It has also repeatedly stated it is on track to deliver cumulative cost savings of £100 million. The forecasts for 2019, the first full year under the creative guidance of Tisci, could be crucial.
Burberry Group shares have a consensus rating of ‘Hold’ alongside an average target price of £19.13.
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