The Burberry share price is going bananas – what’s happening?
Every time I check the Burberry (LSE: BRBY) share price, itâs doing one of two things. Bouncing up, or bouncing down. Lately, itâs been moving by several percentage points almost every day. Whatâs it trying to tell us?
The FTSE 100-listed luxury fashion retailer has a lot of explaining to do, given its recent hyper-volatile performance. The shares are down almost 40% over three years, but theyâre up 43% in the last 12 months.
Fruity FTSE 100 stock
The plunge began in 2023, as the luxury goods sector struggled across the board, largely due to falling demand from key markets such as China. Profit warnings, falling revenues and slowing retail sales spooked investors. But not me. I saw the trouble as a buying opportunity and dived in, only to find myself sitting on a quickfire 40% loss as the slide continued.
By September 2024, the shares had slumped to a 15-year low, and Burberry was relegated to the FTSE 250. I doggedly stuck with it, and I’m glad I did.
The shares bounced back even faster than I could have imagined, as investors welcomed new CEO Joshua Schulmanâs Burberry Forward strategy. This aimed to refocus the brand on its core heritage products, such as outerwear and trench coats, simplify its retail footprint and cut costs.
I thought investors jumped too soon, to be honest, because Schulman hadnât actually delivered anything yet, just set out the plan. Still, I wasnât complaining.
And now it appears to be paying off. In November, Burberry reported an increase in quarterly comparable store sales for the first time in two years, helped by a turnaround in China. It posted an adjusted operating profit of £19m in the first half to 27 September, going some way towards reversing a £41m loss a year earlier. Operating margins turned positive at 1.9%, up from a negative 3.8%. They’re still wafer thin though.
JPMorgan subsequently downgraded Burberry from Neutral to Underweight, suggesting consensus forecasts were too optimistic given wider macroeconomic challenges. There hasnât been much company-specific news around, but the shares have been going bananas as sentiment fills the vacuum. They jumped 4.62% yesterday, but are down 3.38% today (7 January). That’s just one example.
This stock is volatile
Despite their volatility, the general direction of travel is upwards. So should investors sink their teeth into Burberry today?
One thing to note. Burberry publishes its Q3 trading update on 24 January. While we wait, broker RBC remains optimistic. It notes that last year, Burberry was busy clearing excess inventories. Thatâs largely over now. RBC still rates the stock Outperform and predicts 2% like-for-like sales growth to £658m, led by growth of 3% in Greater China and 2% across the Americas.
RBCâs target price is 1,400p, but that implies a modest rise of around 5% from todayâs 1,314p. Consensus forecasts produce a target of just 1,310p, down slightly from today. This backs my own view about Burberry, which is this.
If I didnât already own Burberry shares, they wouldnât be my first pick today as progress could get stickier from here. Iâm holding, but investors should consider looking elsewhere on the FTSE for the next big recovery play. Maybe something a little less bananas.
The post The Burberry share price is going bananas â whatâs happening? appeared first on The Motley Fool UK.
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Harvey Jones has positions in Burberry Group Plc. The Motley Fool UK has recommended Burberry Group Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
