Burberry Group PLC

Burberry Group PLC is an FTSE 100 index listed global luxury goods manufacturer, retailer, and wholesaler. The Company also licenses third parties to manufacture and distribute products using the Burberry trademarks. The Company's segments include retail/wholesale and licensing.

BRBY will pay a final dividend of 35.4 pence per share on 05 August 2022, while the ex-dividend date will be 30 June 2022.

Investment Rationale – SELL at GBX 1,684.00

• Profit Booking Opportunity: The stock price had breached the Resistance 1 levels provided in last “Buy” report on 09 May 2022. Thus, it would be a decent opportunity to book profit at current levels and escape the market uncertainties.
• Currency Headwinds: BRBY had anticipated a currency tailwind of £159 million on revenue and £92 million on adjusted operating profit in FY23.
• Decline in Free Cash Flow: The free cash flow witnessed a marginal decline from £349 million in FY21 to £340 million for FY22.
• Macroeconomic Risk: The tightening of monetary policy to combat inflation globally and reduced consumer spending in Mainland China may create pressure on BRBY’s growth potential.
• Technical Indicator: Technically, the 14-day RSI (~62.43) approaches overbought territory, signalling a short-term decline. Also, the stock price has breached the upper Bollinger band.

Financial Highlights (for the 52 weeks ended 2 April 2022, as of 18 May 2022)

 (Source: Company Website)

• Financial Growth: During FY22, Burberry reported a 21% and 40% YoY growth in revenue and adjusted diluted earnings per share.
• Shareholders’ Distribution: The full-year dividend per share of 47 pence grew by 11% YoY, while the Company reaffirmed its intention to to buy back shares worth £400 million in FY23.

Share Price Chart

 (Source: REFINITIV; Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY23E) (Illustrative)

Conclusion

Please note markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Based on the decent profit booking opportunity, adverse impact of currency headwinds during FY23, and unfavourable valuation conducted above, we have given a "SELL" recommendation on Burberry Group PLC at the current market price of GBX 1,684.00 (as of 27 May 2022 at 11:54 AM GMT+1). 

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Note 3: Dividend Yield may vary as per the stock price movement.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 5: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

Disclaimer

References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.

This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332. Kalkine Limited is authorised and regulated by the Financial Conduct Authority under reference number 579414.

The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated. Kalkine does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation.

Kalkine does not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation. Kalkine’s non-personalised advice does not in any way endorse or recommend individuals, investment products or services for your personal financial situation. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional authorised financial planner and adviser. You should be aware that the value of any investment and the income from it can go down as well as up and you may not get back the amount invested.

Kalkine Media Limited, an affiliate of Kalkine Limited, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.