15th October 2015
As Burberry gives a first half trading update, Ian Forrest, investment research analyst at The Share Centre, explains what it could mean for investors…
A disappointing first half trading update from Burberry has hardly surprised investors.
The main focus was on the news that second quarter sales in China dropped as the external environment became more challenging. Burberry reported a 2% rise in retail revenues to £774m for the first half, although overall revenues were flat at £1.1bn.
Sales of the iconic trench coats and scarves remain healthy and the company is taking a range of measures to reduce costs and improve service.
Pre-tax profits for the year are still expected to be “broadly in line” with the £445m forecast by analysts in July, although that represents a 2.5% decline compared to last year.
For interested investors, it is worth noting that amidst the focus on trading in China, the company did report good sales growth in Europe and the Americas.
The shares dropped 11% in early trading and are now at a two-year low.
We had previously recommended Burberry as a ‘buy’ for medium risk investors seeking growth. In the light of the worsening position for luxury goods, generally in China, highlighted by recent news from other companies in the sector this week, we have placed our recommendation under review.