Burberry slumps to four-year low after poor trading update
Burberry shares slumped last week after its latest trading update, and the shares have now halved since their record high last April.
Burberry slumps to four-year low after poor trading update
Burberry's shares have experienced a significant decline following the company's announcement that it did not witness the anticipated increase in global demand during the crucial Christmas season. The luxury brand, has been striving to reposition itself in the higher-end market as part of a turnaround plan. However, in November, the company had already cautioned about its annual profit outlook.
During that time, Burberry had reported positive signs for its first collection under the creative direction of new designer Daniel Lee. Nevertheless, in an unexpected trading update on Friday, Burberry revealed that its retail revenue for the 13-week period ending on December 30th had dropped by 7% compared to the same period the previous year, amounting to £706 million.
Unlike its competitors, Burberry primarily caters to a middle-income market, which makes it challenging to match the marketing expenditures of major names like LVMH. Although the stock's price-to-earnings ratio (P/E) of 10.8 and a yield of 5% may enhance its appeal, the pessimistic outlook and the substantial progress required for the turnaround program cast a shadow over Burberry's future.
Analyst ratings for Burberry
Refinitiv data shows a consensus analyst rating of ‘hold’ for Burberry with 1 buy, 18 hold and 3 sell – and a mean of estimates suggesting a long-term price target of 2,174.14 pence for the share, roughly 76% higher than the current price (as of 15 January 2024).
Technical outlook on the Burberry share price
Burberry’s share price has been rapidly falling from its April 2023 peak at 2,656 pence, by around 54%, with further downside looking probable.
Burberry Weekly Candlestick Chart
The Burberry share price, which is already trading at a near 12.5% year-to-date discount and is on track for its fifth consecutive week of falls, is fast approaching last week’s low at 1,162.5p. Below it beckons the share’s pandemic low at 1,017p.
Burberry Daily Candlestick Chart
Resistance can be seen at last week’s 1,359.5p to 1,301p price gap and along the April-to-January downtrend line at 1,405p. While it and last week’s high at 1,420p aren’t overcome, the medium-term trend will remain bearish.
Only a currently unexpected bullish reversal and rise above 1,420p would put the March-to-July lows at 1,534.5p to 1,473.5p on the plate.
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