Can Burberry overcome underwhelming performance in Asian market?

Share price has dropped but hopes are that the well-received Tisci collection can boost sales.

Article updated: 16 May 2019 12:00pm Author: Ian Forrest

  • Company announces £150m share buyback and increased dividend.
  • Social media strategy continues to attract Generation Z.
  • We continue to recommend the share as a ‘hold’ for investors willing to accept a medium to higher level of risk.

Today’s full-year results from the luxury goods group Burberry were seen as disappointing with weaker sales growth, especially in its key growth markets in Asia. Adjusted operating profits dropped 6% to £443mn and revenue was unchanged at £2.72bn. Comparable retail stores saw growth drop from 3% last year to 2%, but the company said the first collections from new creative director Riccardo Tisci had been well received. Sales growth in south-east Asia was in the low single digits and the group expects performance in the new financial year to be weighted towards the second half.

The market reacted negatively to the results with the shares down 4% in early trading mainly due to the weaker growth in Asia, but investors should not overlook the positives in today’s statement. The company confirmed its previous full-year guidance, raised its target for cost savings and announced a £150mn share buyback along with an increase in the dividend. The increased use of social media such as Instagram should also help to drive sales with younger consumers.

Our View on Burberry - Hold

We continue with our ‘Hold’ recommendation for investors who are seeking a balanced return and willing to accept a medium to higher level of risk.

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Ian Forrest

Investment Research Analyst

Ian’s background in investments, financial journalism and research has seen him advising private investors on equities and helping to manage portfolios. His qualifications include the Certificate in Financial Planning and the Chartered Institute for Securities & Investment’s Investment Advice Diploma.