Shares in Burberry (BRBY) topped the FTSE 100 leaderboard on Friday, bouncing 8% higher to £21.44 on news the luxury goods group now expects annual sales and adjusted operating profit to beat consensus expectations as the strong rebound in performance since December continues.
In a surprise update ahead of its 27 March year-end, Burberry said fourth quarter like-for-like retail sales are expected to be ‘in the range of 28%-to-32% higher than the same period last year’.
This is impressive considering the trenchcoats-to-cashmere scarves seller is likely to be just the first stage in a multi-phase bounce back.
STRUTTING DOWN THE CATWALK
A luxury ‘mono brand’ boasting strong heritage, Burberry’s exposure to spending by globe-trotting, free-spending Asian customers proved a headwind at the height of the pandemic, derailing the momentum built under chief executive Marco Gobbetti.
Yet Burberry has been strutting down the catwalk with quite a pose since the latter part of 2020 as its earnings recovery takes shape. Today’s unscheduled update shows that current trading is better than expected, although the impact of the pandemic means full year group sales will be down by 10%-to-11%.
THE EXPERT’S VIEW
Russ Mould, investment director at AJ Bell, commented: ‘A lot of its business has historically come from Asian tourists taking trips across Europe. They like to spend big and its products are highly desirable. The restrictions on international travel are only in the nascent stages of being lifted and the return of tourist-related sales may not pick up in earnest until 2022.
‘Therefore, current sales are likely to be driven by domestic customers. In January it flagged good full-price sales in places like the Americas, mainland China and Korea.
‘As more regions start to come out of lockdown restrictions, there is a sense that we could see a huge spending spree as a lot of people fortunate to have been working throughout the pandemic may have amassed considerable spare cash.
‘The idea that we could see the Roaring Twenties is very real and luxury goods companies such as Burberry could be major beneficiaries.’
