Burberry Profits Slide, Shares Still Undervalued

Updated: We're reducing our fair value estimate for the luxury stock after disappointing results

Jelena Sokolova 16 May, 2024 | 2:28PM Alliance News
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Burberry

Burberry shares fell after the company announced a fall in profits for the full year.

We are reducing our fair value estimate for narrow-moat Burberry to £16.80 from £21 as the company reported a decline in revenue and profits for fiscal 2023/24. For the fourth quarter, Burberry's comparable revenue was down 12%, at the low end of peers. Only Kering’s Gucci and Ferragamo brands did worse." 

Regionally, the Americas continued to be weak, down 12%; in the Europe, Middle East, and Africa region comparable sales were down 3%; and sales in the Asia-Pacific were down 17%. Mainland Chinese customer spending was down 12% globally. Adjusted operating profit was down 25% at constant exchange rates, weighed down by investments in product quality not fully offset by pricing, increased stock provisions, and general inflation. Shares remain undervalued.

Key Morningstar Metrics for Burberry Stock

• Fair Value Estimate: £16.80
• Morningstar Rating: 5 stars
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: High

Burberry Share Price Reaction

Shares in Burberry (BRBY) fell on Wednesday after it reported a 40% fall in profits for the financial year to March 30 annd warned of tough trading conditions in this financial year.

Shares in the London-based luxury goods retailer lost 5% to £11.27. The FTSE 100 stock is down 54% over the past 12 months and nearly 20% in 2024 so far.

 

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Jelena Sokolova  is an equity analyst for Morningstar

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