FTSE 100 dips as Burberry shares fall out of fashion
Burberry shares were at the bottom of the blue chip index after tumbling 9.3% or 166p to 1,619p.
Burberry fell into the red and dragged the FTSE 100 down with it, as investors reacted poorly to a drop in UK sales over the final quarter of 2017.
The blue chip index closed lower by around 0.4% or 30.5 points at 7,725.43 points, with Burberry holding the bottom spot after tumbling 9.3% or 166p to 1,619p.
The fashion house said like-for-like sales in the UK fell by a “high single-digit percentage” in the last three months of 2017, as it failed to match strong comparable figures in 2016 when a boom in tourist spending sent sales up 40% as many overseas shoppers took advantage of the weak pound.
Overall retail revenues fell 2% on a reported basis to £719 million.
But City Index market analyst Ken Odeluga said the share reaction was over the top.
“Burberry had another strained quarter. Was it poor enough to warrant sending as much as £640m of share value up in smoke on Wednesday? We doubt it,” he said.
“The decline looks like an overreaction to the group’s 2% retail sales fall.”
Despite no major economic announcements, sterling was up 0.3% against the US dollar to a new post-Brexit vote high of 1.383 – its highest level since June 24 2016.
Versus the euro, sterling jumped 0.5% to a one-week high of 1.130.
Across Europe, the French Cac 40 and German Dax fell 0.36% and 0.47% respectively.
Brent crude prices edged higher by 0.1% to 69.36 US dollars per barrel amid signs of stronger demand and a diminishing energy glut linked to commitments by Opec and Russia to cap production.
In UK stocks, Rolls-Royce Holdings rose 46.6p to 900p after the engine maker announced a wide-ranging restructuring that will include reducing its five operating businesses to three core units – civil aerospace, defence and power systems.
The company is also beginning a strategic review of its commercial marine business which may result in a sale.
Shares in publisher and events firm Informa tumbled 42.4p to 705p amid news that it will revive takeover talks with rival UBM that fell through nearly a decade ago. The move would create a company worth £9 billion.
Pearson shares dropped 33.4p at 685p as investors focused on declining revenues and a weak outlook for 2018 rather than the disposals and favourable tax rates that helped the company raise annual profit forecasts.
The education group says it now expects full-year adjusted operating profit at the upper end of its guidance at £600 million to £605 million, thanks to “the further favourable outcome of certain historical tax issues”.
Shares in GKN rose 5.6p to 447.6p as the embattled engineering firm rejected a £7.4 billion hostile takeover bid by Melrose Industries.
GKN said the formal cash-and-stock offer was “effectively unchanged” from last week’s initial approach, which it rejected for undervaluing the firm.
The biggest risers on the FTSE 100 were Rolls-Royce Holdings up 46.6p at 900p, Mediclinic International up 18.8p at 619p, NMC Health up 50p at 3,152p, and Halma up 18p at 1,307p.
The biggest fallers on the FTSE 100 were Burberry Group down 166p to 1,619p, Informa down 42.4p to 705p, Pearson down 33.4p at 685p, and Micro Focus International down 56p at 2,175p.