Belfast Telegraph

Saturday 29 November 2014

Burberry shares slump as Eastern promise fades

The Week Ahead

Designer brand Burberry has rather fallen out of fashion over the past few weeks.

In July the upmarket label's share price reached 1,600p but a recent slump has pushed it down 25% on that peak.

While the fall came alongside the wider market sell-off, Burberry has been particularly badly hit, thanks to fears about China's growth prospects. In common with its peers, the firm has benefited from a huge boom in the country's demand for luxury goods, so the retailer's comments on trading in Asia, when it releases its first-half trading update on Wednesday, should make for interesting reading.

UBS's Fred Speirs will be keeping his eye out. He says that any update on the situation in China would be "critical to share price reaction".

More generally, Mr Speirs forecasts that the company will announce total sales for the period of £806m, a 27% rise.

Seymour Pierce's Kate Calvert, meanwhile, is slightly more bullish, predicting sales will reach £828m.

She says Burberry will "report strong second-quarter trading", although she warns investors will be on the lookout for signs that department stores in the US may be cutting back their wholesale orders for 2012.

Some are also expressing concerns over the state of Burberry's margins. Nomura's Fraser Ramzan points out that the company has already said that its operating costs for the year will be weighted towards the first-half and he, therefore, predicts a 0.5% drop in earnings margins for its retail and wholesale operations.

Nonetheless, he still believes in Burberry's growth strategy, saying that the investments it has made this year mean "arguably some of the greatest gains (are) to come".

Today

Results/Updates: N Brown and Robert Walters.

Tomorrow

After cautious outlook comments by its rival Wolseley last week, builders' merchant Travis Perkins's update on Wednesday will be closely examined for clues as to what the future holds.

Results/Updates: Burberry, Fresnillo and Travis Perkins.

Thursday

Investors will be hoping for comments from Labrokes on how talks with takeover target Sportingbet are going.

In terms of performance over the third quarter, Citigroup's James Ainley says that - partly thanks to the tough comparison with last year when the World Cup was being staged - Ladbrokes will reveal "sluggish trading", with its net revenue dipping 0.5%. Meanwhile, outside the UK, the analyst is forecasting revenue will be down 5.1%, with a 12.4% slump in Belgium - because of tax regime changes.

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