Analysts have expressed their relief on the back of Burberry’s half year trading update, which revealed that revenues had risen 8%.
Investec analyst Bethany Hocking said, “our overall feeling is one of slight relief”. She added: “We had been long-term bulls, but a lack of visibility saw us move to Hold last month. Today’s statement is net positive for us, and we do not ascribe to the view that the brand is damaged.”
Independent analyst Nick Bubb said after the announcement on September 11, which warned full year profits are likely to be at the lower end of market expectations, the luxury sector was waiting to see if Burberry is underperforming the sector or just following the market sales trend, but he said the warning now looks to have been “a bit premature”.
He added: “At least the retail Q2 like-for-like of +1% was a bit better than feared, thanks to a modest pick-up in the last three weeks of the period, reversing the negative trend seen in the two/three weeks before that, blamed on lower footfall.”
Gregor Jackson, partner at luxury brand consultancy Gpstudio, said: “The slowdown in Burberry’s sales doesn’t suggest the fashion house has lost any of its appeal amongst its premium customer base – and the fact that they have reported sales have remained strong amongst their top-end, high-spending customers attests to this. It is they who dictate perception of brands in the category amongst the general public over the long term.”
He added: “As long as Burberry remains the brand of choice for the well-healed (and well-photographed) customer, they remain well-positioned to recover faster than other mid-market luxury brands that felt the pinch earlier and to a far greater degree. Brand equity is the key to the global luxury market and those who retain their brand value are those best-positioned to ride out economic downturns and emerge stronger, faster.”
However Jaana Jatyri, chief executive officer of fashion forecasting company Trendstop.com, said the latest update would not have dissipated fears.
“The festive fourth quarter will strengthen the retailer’s position but there has been a clear slowdown throughout the year,” said Jatyri.
“The emerging markets have proved to be a double-edged sword for Burberry.
“Yes, there is money in the emerging markets but newly acquired customers can also be more fickle than those in the established territories where wealth is arguably more stable. The fact that Germany and France have proved particularly robust for Burberry underlines this fact.”
However Jatrri continued: “I still believe the longer term future of Burberry remains bright. It is an innovative, forward-looking brand, as shown by its recent investment in creating digitally-enabled stores of the future.”