Reaction to Burberry update a bit harsh, says City analyst

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Burberry Group PLC (LSE:BRBY) got a “somewhat harsh” reaction after its latest update, according to a City analyst.


Shares in the luxury designer dropped as low as 9% earlier on Thursday, then it managed to pare some losses.


READ: Burberry says revenues back to pre-pandemic levels as full-price sales drive profits up


The market didn’t like that the strong sales growth in the Americas, Mainland China and South Korea was not matched by other regions due to low tourist numbers.


“We think the market’s reaction to Burberry results this morning is somewhat harsh,” said Nicholas Hyett, analyst at Hargreaves Lansdown.


“True, with international long-haul tourists still few and far between Burberry’s European stores continue to struggle – dependent as they are on well-heeled travellers for a large slice of their sales. However, at least some of those sales seem to be shifting towards home markets – with strong growth in the Americas and China suggesting the Burberry brand continues to resonate well even if the sales channel is different. So much so that sales are back to pre-pandemic levels.”


“The revenue recovery has fed through to profits, helped by reduced discounting and price rises, and that in turn has led management to restart the dividend and announce a GBP150m share buyback. With operating profits on course to beat 2019 results for the year as a whole, the group seems to have put the pandemic behind it.”


Shares were down 5% to 1,868p on Thursday afternoon.

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