Softer consumer sentiment weighs on current trading

Burberry published a slightly better-than-expected first half performance but warned that the slowdown in luxury demand across the globe has started to weigh on its business. The group said that it is unlikely to achieve its guidance for FY23/24 if the weaker demand persists.

Encouraging start to the year

Burberry released a start to the year bang in line with the market’s expectations. The recovery in the Chinese market and the lifting of the last travel restrictions in Asia resulted in significant sales growth in Asia Pacific, partially offset by the ongoing slowdown in the Americas. The ongoing recovery in Asian travel retail and the arrival of the new Daniel Lee collection in stores at the end of the second quarter will drive growth for the rest of the year.

A promising start to the new year

Burberry published lower-than-expected top-line growth for Q3 22/23. The soaring Covid-19 infection rate in China at the end of 2022 resulted in a sales contraction of 23% in that country during the quarter. Outside of China sales increased by 11% with EMEIA, Japan, South Korea and South Asia Pacific recording double-digit growth. Although the timing and speed of the recovery remain unpredictable, Burberry has seen a very promising start to 2023.

Lee’s handbags should unlock Burberry’s long-term potential

Burberry published slightly better-than-expected H1 22/23 figures. The resumed tourist spending in Europe and progressively improved trading in mainland China have led comparable retail sales to increase by 11% in Q2 22/23 after advancing 1% in Q1 22/23. Although the group sees the recessionary risk and lingering COVID-19-restrictions weighing on business in the coming months, the new leader aims to increase revenue to £4bn in the next three to five years with an increase in contribution from a

Cautious for the year ahead

Burberry released flat revenue growth for Q1 22/23, ahead of consensus and our expectations. Strong rebounds in Japan and EMEIA partially offset the sales contraction in Mainland China (-35% yoy). However, the strong momentum in the Americas is starting to wane. Although the group saw an improved performance in China since stores reopened in June, the uncertain macroeconomic situation (lower-than-expected GDP growth in Q2 22) in the country still raises doubts for the rest of the year.

Mixed sentiment after the FY22 release

Burberry has published an encouraging FY21/22 result, reflecting a good progression in margin and brand quality. However, the group confirmed that the outlook is dependent on the impact of COVID-19 in China, and the group is actively managing the headwind from inflation within the current uncertain macro-economic environment. The new CEO reaffirmed the continuation of the strategic direction in the medium term, offering greater stability.

Strategic markdown exit is bearing fruit

Reaping the benefits of reducing markdowns, Burberry saw full-price sales increase by 15% yoy in the quarter. The strong performance from its own retail and e-commerce channels, especially in the key product categories leather goods and outwear, has led the group to upgrade its expectations for FY21/22 adjusted operating profit. The new CEO, Jonathan Akeroyd, will take up his post two weeks earlier than planned. The group gave the implication that the new CEO will continue to focus on the same

Limited visibility for the mid-term

Burberry has delivered a good start to the year. The strong full-price growth, especially in the main strategic focus categories (leather goods, outwear and shoes) showing a very encouraging trajectory. However, the ongoing reduction in markdowns will continue to impact the performance for FY21. Although Burberry has confirmed its mid-term guidance and reaffirmed that its mid-term strategic plan will remain unchanged. The unavailability of a meaningful update on the recruitment of the new CEO a

The unexpected departure of Marco Gobbetti

Burberry’s stock slumped 8% after the group’s CEO unexpectedly announced his departure to join the Italian peer group Salvatore Ferragamo. Although Marco Gobbetti will remain with Burberry until the end of FY21 and support the executive team through the transition, his departure at Burberry’s most critical turning point is likely to make the brand’s turnaround more challenging and slow it down.

Cautious outlook clouds good results

Burberry has released its FY 20/21 figures (ended in March), above consensus and our expectations. The rapid full-price sales rebound and margin progression in the second half of FY20/21 have confirmed the improved attractiveness of the brand; in particular, the strong demand in China, Korea and the US has continued to be the firepower. However, the updated cautious guidance is indicating some weakness in terms of profitability for the near term.

Strategic turnaround is on track

Although the quarterly sales have been considerably impacted by the second wave of lockdowns and the group’s own decision to reduce markdowns, the high single-digit full-price sales growth and increased contribution in leather and outerwear categories have shown that the group is continuing to progress with its strategic priorities.

Cautious about the year-end trading environment after Q2 beats

Burberry has reported its H1 21 figures and both the top line and profitability are ahead of consensus and its previous guidance. Despite good Q2 21 improvements and a continued positive trend in October, the group warns that the second wave of lockdowns and the group’s strategy to reduce markdowns may weigh on the group’s business in the second half. However, we expect the increased brand awareness of Burberry in China could help the group to mitigate the second wave pressure in EMEIA and make

Business contraction will persist for a while

As expected, the group’s business in the first quarter has been heavily impacted by the pandemic-led store closures, especially in EMEIA and the Americas. Although the sales recovery in Mainland China was encouraging, the worldwide shrinking tourist flows and the reduction in foot traffic in reopened stores have led the group to provide a very cautious outlook for Q2 20/21. The group’s greater dependence on travel retail and lower exposure to leather goods are making the group less resilient c

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Surface Transforms plc (SCE LN) - Forecasts and valuation withdrawn

We note the regulatory announcement this morning from Surface Transforms and withdraw our estimates and valuation, pending conversations with management.

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Robust margin and cash performance

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