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The Burberry (LSE: BRBY) share price has been through hell in recent years. Now it’s back with a vengeance.
I pored over this morning’s (24 January) Q3 results, which include the crucial Christmas trading period, wondering how investors would respond.
Would they take flight at the 7% year-on-year drop in retail revenues to £659m? Or view that as progress following a 22% sales first-half slump?
Comparable store sales fell by just 4% in Q3, compared with a 20% drop in the first half. That’s progress of sorts but they’re still falling.
Can the FTSE 250 stock carry on with its recovery?
I also wondered whether markets would swallow CEO Joshua Schulman’s claim today that his strategic plan “will improve our performance and drive long-term value creation”.
In the group’s last set of results, published on 14 November, investors swung behind the new broom. Burberry shares jumped 17% as Schulman unveiled his ‘Burberry forward’ plan by targeting £40m in savings and “reconnecting our brand with its original purpose”.
The more I looked at today’s report, the more optimistic I felt. Especially with Schulman stating that “it is now more likely our second-half results will broadly offset the first-half adjusted operating loss”.
In November, Burberry said it was too early to tell whether the second half would fully offset the first half on a bottom-line basis. So that’s progress too. I anticipated another jump in the stock and boy, did we get it.
As I write, it’s up 15% and I’m a happy chap because Burberry was my biggest loser last year, leaving me with a 40% paper loss at one point. That’s despite buying the shares after the first of several profit warnings, and averaging down with each subsequent slice of bad news.
The rally began in November and the shares are now up 50% in the last three months. Although they’re still down around 14% over one year (and 55% over two).
As well as celebrating the recovery, I’m kicking myself for not buying even more when Burberry was down. Although I’ve learned that it’s almost impossible to call the very bottom of the market, or an individual stock.
This growth stock is back in play
So today, I’ll take the win and look forward to a brighter 2025. I already have a big stake in Burberry, so won’t buy more. I can see why other investors would consider doing so. But I’d take my time, personally, and beware profit takers. Stocks have a habit of retreating after a big early morning jump like this one. Also, the stock isn’t as cheap as it was, trading at 14.5 times earnings.
Also with the global economy still struggling, we can’t assume the consumers have got their taste for luxury back. China is a particular worry as its economy resists attempts to get it moving again.
The US is in a more optimistic mood, but then we have Donald Trump’s trade tariffs to worry about. Burberry would be right in the firing line, should we get them.
Also, markets are putting a lot of faith in Shulman’s words, but as he admits himself, “it is still very early in our transformation and there remains much to do”. Enough of that. Let’s enjoy today. Burberry is back on track and these things can be infectious. Bring it on!
