Stay informed with free updates
Simply sign up to the Investments myFT Digest — delivered directly to your inbox.
The board of Burberry seems convinced there are better times ahead after a punishing period for the luxury fashion group. The stock plunged 20 per cent after the company issued a profit warning, suspended its dividend and replaced its chief executive.
The global slowdown in luxury consumption is partly responsible, though it’s also clear that customers haven’t been taken with Burberry’s new artistic direction. Chief creative officer Daniel Lee, who joined 18 months ago, had hoped to revive the brand by placing greater emphasis on its heritage.
Comparable store sales were down 21 per cent in the three months to the end of June and all regions saw sales fall, with the exception of Japan.
Despite its present predicament, some of Burberry’s directors are clearly of the view that a rebound is inevitable. Its chair, Gerry Murphy, picked up 20,000 shares at a price of 725p each on July 16, while chief financial officer Catherine Ferry bought more than 8,000 shares at around 720p apiece.
Two independent non-executive directors also acquired 5,000 shares between them on the same day.
On the operational front, management has vowed to take “decisive action to rebalance our offer to be more familiar to Burberry’s core customers”. Whether Lee will stay on as the brand’s head designer through yet another shift in strategy is unknown. Further churn at the top could mean the stock remains out of fashion for a while longer.
Steel stakeholder cuts exposure
Structural steel specialist Billington Holdings has enjoyed a very strong run in its share price over a near two-year period when other companies in the building trade have struggled.
Since hitting a five-year low of 185p in September 2022, the shares went on an upward trajectory that lasted until May this year, when they topped out at 600p.
This run-up in the share price of a company that featured in Investors’ Chronicle’s small-cap columnist Simon Thompson’s 2022 Bargain Shares Portfolio coincided with a very strong period of trading.
Revenue for 2023 jumped by 53 per cent as the group’s contracting business delivered several “higher margin” projects, including an energy from waste plant in Scotland, commercial office buildings in Manchester and a couple of data centres on the outskirts of London.
On top of this, the company reaped the benefits of a capital investment programme that drove efficiencies and lifted margins. As a result, pre-tax profit more than doubled to £13.4mn.
Yet the 20 per cent share price decline since its May peak reflects concerns that this purple patch may not last. House broker Cavendish forecasts a 34 per cent fall in adjusted earnings per share this year. The downward momentum won’t have been helped by a big sell-off by its largest shareholder Gutenga Investments, whose director Alexander Ospelt sits on Billington’s board.
This sale took Gutenga’s stake from just below 35 per cent to around 20 per cent.
Gutenga Investments said it had always intended “to bring down its exposure to a more manageable level over time, which has been achieved”. The sale was a one-off and “clears any overhang”, it added.
The shares still only trade at nine-times forecast earnings – slightly below peers and their five-year average. But with stronger earnings forecast for 2025, Simon Thompson remains confident in the potential for further upside.