Burberry has reported a very strong set of results, with revenue, profit, margins, free cash flow and dividends all heading in the right direction. China’s reopening has certainly helped to fuel demand for its products, but it isn’t solely reliant on that region to do well.
Chief executive Jonathan Akeroyd and designer Daniel Lee are trying to refocus on ‘Britishness’ to help keep the brand distinctive from what is now a highly competitive market globally.
AJ Bell’s Russ Mould said: “Having a wealthy clientele is an advantage in the current economic climate as Burberry’s typical customer is going to be less affected by the rising cost of living than someone whose pay packet is almost entirely gobbled up by bills and everyday essentials.
“However, that doesn’t mean Burberry is immune from an economic downturn. We’ve seen in recent months signs of cracks in the luxury goods market. Diamond prices have been falling, so too the value of second-hand luxury watches as the market is flooded with supply.
“The fact Burberry hasn’t lifted its guidance for the new financial year after reporting such a strong set of results, and reference to it being ‘mindful’ of the macroeconomic and geopolitical environment, appear to have been the trigger for some investors to take profits in the stock, with the share price falling more than 6% on the latest news.
“Investors want companies to consistently beat expectations and if they can’t do that, they will look elsewhere in the current market.”
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