Burberry share price slumps to 14-year lows after dire trading update
There was no shortage of bad news for Burberry shareholders this morning, and the shares have slumped to their lowest level since 2010 in response.
Triple-whammy of bad news for Burberry
This morning saw a dire update from luxury retailer Burberry. Sales slumped by more than a fifth, while warning that unless the situation improved, it would also report an operating loss for the first half, and that annual profits would also be below forecasts. To cap all this bad news, it also suspended its dividend in a bid to save money.
Burberry's leadership shake-up
Burberry has also announced a significant change in leadership. Chief executive officer (CEO), Jonathan Akeroyd, is departing after a two-year tenure, to be replaced by Joshua Schulman, formerly of Coach and Jimmy Choo. This sudden shift signals the company's recognition of its ongoing challenges and the need for fresh leadership to steer the brand in a new direction.
Sales performance and strategic missteps
The company's attempts to reposition itself as a more upmarket brand and emphasise its British heritage have not yielded the desired results. Instead, Burberry has resorted to heavy discounting, which analysts view as a sign of the strategy's failure.
Luxury market context
Burberry's struggles are set against a backdrop of varying fortunes in the luxury sector. While some brands like Hermès continue to thrive, others are facing significant challenges. This disparity highlights the competitive nature of the luxury market and the importance of effective brand positioning and management.
Valuation hits new low
At around 10 times earnings, Burberry shares trade at their lowest valuation in 20 years. Arguably the update this morning was a bid to get all the bad news in the price at once, and thus the news might tempt some investors to buy into the share price at current levels.
High short interest
Burberry is one of the most shorted stocks in the FTSE 100 at present, with 4.3% of its shares out on loan for short positions. This reflects continued scepticism around the outlook for the company, but does leave open the possibility of a short squeeze, particularly after the big fall in the share price in the wake of this morning’s news.
Burberry share price – technical analysis
Burberry’s share price, down 15% today and around 47% year-to-date, is trading at levels last seen in July 2010, having so far slid to around 736p.
Burberry monthly chart
With the Burberry share price having so far fallen over twelve consecutive months, it may soon reach its April 2007 peak which was made at 725.6p. Together with the May 2010 low at 611.6p this level is expected offer support, at least in the short-term.
Major resistance can now be spotted between the October 2011, September and October 2012, January and June 2016 and March 2020 lows at 998.0p-to-1,047p.
Below this key resistance area lie the early and mid-July lows at 844.6p-to-848.4p which represent the first resistance zone.
Burberry daily chart
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