Burberry enjoying market support

Even with competitors struggling, support for the premium top-end fashion house has remained strong. 

A Burberry branch
Source: Bloomberg

On Wednesday 14 January Burberry is set to release its third-quarter figures to the market. In the run up to this release, the results from many of Burberry’s UK-based competitors have been disappointing. The last quarter is arguably the most important of the year for the company, and this will be another test for CEO Christopher Bailey as he takes the helm of his first Christmas period without the guiding hand of Angela Ahrendts.

The last set of half-yearly figures was well received by the markets and triggered a run in the shares. It is worth noting that the company did see £75 million taken off its revenue because of fluctuations in the currency markets. The last three months will have seen the continuing weakness in the pound eat into the profitability of the firm.

The company’s exposure to the Asian market, specifically China, has proven to be highly lucrative as demand for the stereotypical UK clothing range has struck a chord with the middle class. As much as growth in China has been cooling over the last number of years the indebtedness of the population has been increasing and, therefore, their spending power on western luxuries has been increasing.

Of the institutions that have given Burberry a rating, ten are buys, 14 holds and four sells. The average price target for the company is 1702p, just above the current 1650p price. The 50-day moving average has proven to be quite supportive when it has been tested over the last four months, but the divergence away from the 200-DMA could give cause for concern.

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