Burberry (LON:BRBY) acknowledges that it has been the beneficiary of “exceptional” retailing factors that attracted increased footfall to its UK businesses in its most recent quarter. Whilst positive, the comment does also have a built in signal of caution about how sustainable the advantage might be—particularly in light of the likely stabilisation of sterling in the coming months, now that a portion of Brexit uncertainty has been lifted.
The core region of China is still not ‘fixed’. It remains the most pressing project, in our view, for the group’s incoming CEO to sort out. Marco Gobbetti is likely to deploy of some of the most sophisticated methods in the luxury purveyor’s lexicon—or at least that’s how his expertise have been sold. The point is that the bar has been raised, replete with investor expectations—some of which account for the group’s resilient stock price advance over the last half year. In other words, disappointment is an increasing risk in the face of some of the group’s more intractable challenges.
Still, there are good grounds to expect that Burberry shares can remain mostly on the up for the time being, after their 60% rise since mid-June.
Forecast-beating comparable sales, cost measures remaining on track, the return of APAC growth, and most importantly, an affirmation that adjusted profit before tax will meet market expectations, should all help. The stock may not escape some flak in the near term entirely though, on chances that sterling can strengthen further in the wake of its spectacular bounce on Tuesday.
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