Management seem to be pinning hopes on digital channels, new collections and cost savings.
Burberry results show 1% fall in revenue despite Christmas
- Management remain committed to deliver cumulative cost savings of £100m.
- Figures fall short of expectations and lack detail, with shares falling 2% in early trading.
- We continue to recommend the shares as medium risk ‘hold’.
Today’s report, which includes the Christmas period, saw retail revenues fall by 1% while comparable store sales rose by 1%. Management said Asia Pacific sales were driven by mainland China sales up by mid-single digits, while sales in the EMEIA regions saw a small improvement from tourist spending and sales in the Americas were softer. Overall these figures fell short of expectations and the lack of further detail has left the market this morning fairly uninspired with the share down by 2% in early trading.
Management have kept their full year guidance and still expect to deliver cumulative cost savings of £100mn. Evident from the update were details on how the organisation is utilising digital channels through its heavy presence on social media platforms and the use of social influencers both in the Western World but also their largest and most important Chinese market.
While the management point to hopes on the new collections and its digital marketing success, the current macro environment should sound a note of caution for investors. Its key Chinese market is slowing and many analysts still highlight the fact it is still overvalued based of forward P/E ratios. We continue with our ‘Hold’ recommendation for investors seeking growth and willing to accept a medium level of risk.
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