Morningstar | Burberry Reports Results Largely as Expected, Maintains 2020 Guidance; Shares Fairly Valued
We are maintaining our narrow moat rating and GBX 1,790 fair value estimate for Burberry as the company reported preliminary full-year results in line with our expectations. We see the shares as fairly valued.Revenue was flat versus our forecast of down 1.5%, affected by the beauty transition from in-house operation to licensing. Excluding the beauty transition, growth was 2% versus the 1% we forecast. Comparable sales growth was 2%.
The business continues to be affected by channel rationalization on the wholesale and retail side as the company shifts to more high-end positioning. While coming at a short-term cost, the actions are set to improve brand equity long-term, in our view. Adjusted operating profit was GBP 437 million (16.1% margin) versus our expectation of GBP 454 million (16.8% margin), negatively affected by currencies and investments in the new product ranges.
All regions delivered low-single-digit comparable growth rates with softness in Hong Kong and Japan but improvement in the United Kingdom due to favorable tourist flows towards the end of the year. Sales in the Americas decelerated in the second half of the year with softer footfall and subdued tourist flows through the year.
Chinese cluster performance developed positively throughout the year, with consistent low-single-digit growth. Like its peers, Burberry saw a repatriation of Chinese demand towards home markets.
Management reiterated the strong response to the new designer collections and drops (strong double-digit growth). Those will start meaningfully affecting the top line from autumn 2019, when Riccardo Tisci collections will contribute over 60% of the total assortment. The company kept its guidance for broadly stable revenue and operating margin in fiscal 2020, in line with our forecasts.
Burberry Group designs, makes, sources and sells luxury products under the Burberry brand. Co.'s products are for women, men and children and include apparel, accessories, and beauty. Co.'s products are sold globally through its directly operated store network and online at Burberry.com, as well as through franchisees and third-party retailers, both offline and online. In a few selected areas such as Eyewear and Beauty, Co. uses the product and distribution capability of licensing partners. Co. operates in three regions: Asia Pacific; Europe, Middle East, India and Africa; and Americas. As of Mar 31 2017, Co.'s store portfolio had 469 directly-operated stores and 48 franchise stores.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.