Earnings

Burberry share price: what to expect in Q3 earnings

Burberry's share price has climbed 32% over the past 12 months, having picked itself up from an October low.

Under new CEO Marco Gobbetti Burberry is in growth mode. Quarter on quarter growth is at 5%, while earnings per share is 15.25%. Investors will be looking to see if this continues into Q3. But will problems in Hong Kong see the share price drop when the numbers come out this week?

 

When is Burberry reporting?

22 January

 

How Burberry performed in half year results

In November, Burberry reported half year results for the six months up until 28 September. In the report, total revenue came in at £1,281 billion, up 5% from the same quarter last year. Retail store sales also grew 4%, thanks to an uptake in new lines. Operating profit came in at £202 million, up 17%.

Driving these gains has been Gobbetti's strategy of rejuvenating the brand. In the report, Gobbetti said:

"We delivered financial results in line with guidance despite the decline in Hong Kong and we confirm our outlook for FY 2020.”

 

What to look out for in Burberry’s Q3 earnings 

Brand revitalisation helps sales

Creative head Riccardo Tisci has sharpened up Burberry's offering since he joined the company in 2018. Tisci's creations are a big part of a strategy that has seen Burberry shake off its downmarket image. Positive momentum across social media, press and influencers has reinforced this, changing how the public perceives Burberry.

New products now account for around 70% of retail stores’ offerings. Tisci's work delivered strong double digit growth last quarter. Burberry is looking to continue this into Q3, making sales of new lines a must-watch metric.

70%

Proportion of retail stores' offerings made up by new products

 

Problems in Hong Kong persist

Burberry has a large presence in Hong Kong with 12 stores, so any disruption from recent anti-government protests will hurt the company as a whole. In the half year update, sales in Hong Kong were down more than 10%, with £14 million slashed from the value of its stores there. Overall, Hong Kong represents 5% of Burberry’s sales in H1, down from 8% in the previous half year period.

Still, the management team at Burberry kept full-year guidance unchanged in H2. That indicates optimism that the luxury fashion brand can ride out the turbulence.

 

What to expect in Burberry's Q3 results?

When Burberry last updated the markets on 14 November, the share price slipped 5.9% over the course of 4 days. Since then, it has gained over 15% as investors get behind the CEO's turnaround strategy. Yet with the disruption in Hong Kong, Burberry's share price could be in for a drop on Wednesday.

For H2, Burberry is continuing with its strategy of revitalising its in-store line up. It expects full price sales to benefit from new items and drive bottom line growth. Any change in full year guidance due to these pressures on Wednesday will hurt the share price.

 

Market cap£9.27bn
PE ratio (TTM)26.29
EPS (TTM)86.60
Profit margin12.86%

Burberry share price vitals, Yahoo finance, 20 January 2019

 

Long-term outlook for Burberry's share price

Analysts tracking Burberry's share price on the Financial Times have an average 2,010p price target. This would see a -13% downside on the current share price. Out of 20 analysts, 3 analysts have Burberry at Outperform, 12 at Hold, 3 on Underperform and 2 at Sell.

A 26.89x price to earnings multiple is expensive. But if Burberry can deliver the goods, it might have the market stitched up.

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