Wednesday, 15 January 2014

Burberry - reiteration is fine

At least with today's update from the UK-listed luxury company Burberry I don't need to formally deny that I have been appointed the company's CEO (see link here)...

The headlines from the company's third quarter update looking striking enough:

'comparable sales up 12%...Double-digit growth in Asia Pacific; mid to high single-digit growth in Americas and EMEIA'
 
Well that's a good start.  But then the statement gets a little more mixed, after noting that store traffic remained mixed (but online more than offset hence the strong headline numbers above)
 
'At current levels, exchange rates will be a significant headwind in the second half and beyond, and the macro environment remains uncertain'
 
How does all the above impact the company's outlook statement?  Well, first and foremost, I note that
'the following outlook is unchanged from the interim results in November 2013'.  So despite the FX headwinds and patchy in-store footfall their retail business is expected to grow at a low to mid single-digit rate and wholesale at a mid to high single-digit rate.  Additionally licensing income and overall margins are expected to both rise slightly. 
 
Given not too much is changing...neither is my 'interesting level to buy a starter position' price of 1425p, originally mentioned here.   As the chart below shows...investors should just be awaiting a bad day.  That probably won't be today following these solid numbers - with the reiterations and strong online strategy - but the inevitable upcoming bout of volatility at some point during 2014 may well provide it. 
 
 
 

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