- China reopening boosting sales
- Growth accelerated in Q4
- But outlook caution and upgrades absence trigger profit-taking
British luxury goods brand Burberry (BRBY) strutted in with strong results for the year ended 1 April 2023 and cheered followers with the news sales growth accelerated to 16% in the fourth quarter as pandemic restrictions in China eased.
However, shares in the trench coats-to-cashmere scarves seller tumbled 6.4% to £23.60 after Burberry maintained, rather than raised, its current year and medium-term targets.
The FTSE 100 fashion house’s reference to being ‘mindful’ of the macroeconomic and geopolitical environment also prompted some investors to take profits in a stock which has stormed 50% higher over the past year.
EYE-CATCHING PROGRESS
Full-year results from the FTSE 100 rainwear-to-leather goods goliath were strong across the board, with sales, profits, margins, free cash flow and dividends all heading in the right direction.
Adjusted operating profit surged 21% higher to £634 million on revenue up 10% to the best part of £3.1 billion, while Burberry’s retail like-for-like sales skipped ahead by 7%.
Burberry highlighted ‘good progress in our core leather goods and outerwear categories’ last year and said revenue accelerated to 16% in the fourth quarter as growth rebounded in Mainland China.
Under new CEO Jonathan Akeroyd and recently-recruited designer Daniel Lee, Burberry is refocusing on ‘Britishness’ in a bid to differentiate the brand in a highly competitive global market.
EXPERT VIEWS
As Edison’s Neil Shah pointed out, for Burberry and the luxury fashion sector more widely, ‘the post-Covid rebound has offset the impact of the cost-of-living crisis, with consumers once again dressing to impress’.
Russ Mould, investment director at AJ Bell, said that having a wealthy clientele ‘is an advantage in the current economic climate as Burberry’s typical customer is going to be less affected by the rising cost of living than someone whose pay packet is almost entirely gobbled up by bills and everyday essentials.’
But Mould pointed out that ‘doesn’t mean Burberry is immune from an economic downturn. We’ve seen in recent months signs of cracks in the luxury goods market.’
He added: ‘Investors want companies to consistently beat expectations and if they can’t do that, they will look elsewhere in the current market.’
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (James Crux) and the editor of the article (Daniel Coatsworth) own shares in AJ Bell.
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