Key Points
- Burberry is attracting new and younger customers despite being a premium brand
- Burberry builds new stores concept with a new design.
- The company upgrades its market expectations on the back of strong performance.
Should I buy Burberry (LSE:BRBY) shares now? Well, before answering that let’s quickly explore what this business actually does.
Burberry is one of the largest luxury brands in the UK. The company, along with its subsidiaries, manufactures luxury goods and wholesale/retails them under its brands. The luxury giant was founded in 1856 and does business under two segments: the Retail/Wholesale and Licensing segments.
The group offers apparel and accessories for men, women and children. Burberry’s products are marketed through its mainline stores, concessions, outlets, digital commerce, department stores, franchisees, and multi-brand stores. Its core products are its outerwear and leather products. Burberry has a significant presence in America, Asia Pacific and EMEIA (Europe, Middle East, India, Africa). How has all this affected Burberry shares?
The bull case for Burberry shares
The company recently released its 2022 fiscal year third-quarter earnings. Looking closely at the results, I found it encouraging. Evidently, Burberry had a strong Q3 with a marked acceleration of full-price sales growth to 26% compared to two years ago (LLY). Aside from that, the company’s dedicated campaign last October yielded positive results. The company saw an attraction of new and younger clientele to its brand. Burberry outerwear full-price sales grew by 38% vs. LLY, while the leather goods full-price sales growth was 29% vs LLY.
Furthermore, the rolling out of the new store concept is progressing well as there are now 31 stores in the new design. This helps customers experience and see the products in a luxury setting. In my mind, this could push the Burberry shares higher. Resulting from the strong Q3 performance, the company upgraded its market expectation.
Rating agencies have come to have a strong place in the financial market. Moody recently released a rating where it acknowledged the relevance of the iconic brand to younger consumers, Burberry’s strong presence in Asia, its well-established position in the global personal luxury goods market, which it expects to continue to enjoy strong growth. These are good indications for me to consider adding Burberry shares to my portfolio. But there are of course threats worth knowing about first.
The risks that lie ahead
Like every other company, Burberry has risks that could affect my potential investment. First, the luxury space is a very competitive one. A better product and pricing from a competitor could drastically affect Burberry’s sales. Also, the company has very few products, hence if one product is affected negatively, it could have a huge impact on the company.
In Moody’s rating, it did not fail to point out some risk factors. Moody pointed to Burberry’s reliance on a single brand, the company’s limited scale and product diversification and the high competition within the industry.
Another factor that concerns me is the impact inflation could have on the company.
Should I buy Burberry Shares Now?
While I think Burberry is a good investment, I’d buy other stocks at this time. Why? Because I simply believe there are better opportunities for my portfolio elsewhere. So, for now, I’ll be keeping Burberry shares on my watchlist.
Learn more about Burberry shares
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Prosper Ambaka does not own shares in any of the companies mentioned. The Money Cog has no position in any of the companies mentioned at the time of writing. Views expressed on the companies and assets mentioned in this article are those of the writer and therefore may differ from the opinions of analysts in The Money Cog Premium services.
