Burberry’s first half profits expected to fall

What to expect for Burberry’s first half earnings?

Burberry Group PLC will publish its first half earnings report on 16 November. It is expected to see revenue rise to £1.39 billion, from £1.35 billion last year, but pre-tax profit is expected to drop to £213.50 million, compared to £226 million last year.

Burberry's first-quarter sales growth of 18 per cent may seem impressive at first glance, but it falls short when compared to its upmarket rival Hermes, which has achieved even higher growth. This highlights the significant challenge that Burberry faces.

To achieve its midterm target of £4bn in annual sales, a third higher than its current levels, Burberry expand its brand to appeal to a broader audience while maintaining its distinctiveness. This is particularly challenging given that the brand's foundation lies in high-end raincoats and its signature check pattern.

Furthermore, Burberry needs to elevate its brand further upmarket. While the demand for affordable luxury may be affected by the cost-of-living crisis, the high-end fashion and jewellery sectors continue to thrive, especially among affluent consumers in Europe, the US, and China. Burberry has already taken steps to focus its brand by cutting back on licensing deals. However, there is still more work to be done.

Burberry's strategy revolves around increasing both sales and the value of its products, with the aim of boosting sales per square metre of retail space. This approach aligns with the trend observed in the high-end fashion and jewellery market, where brands are focusing on higher-value offerings to cater to the preferences of discerning customers.

Analyst ratings for Burberry’s

Refinitiv data shows a consensus analyst rating of ‘hold’ for Burberry’s – 1 strong buy, 2 buy, 16 hold and 3 sell - with the mean of estimates suggesting a long-term price target of 2,174.14 pence for the share, roughly 31% higher than the current price (as of 10 November 2023).

Technical outlook on the Burberry’s share price

The Burberry’s share price, which is trading nearly at a 20% year-to-date discount, has been trading below its breached 2020-to-2023 uptrend line at 1,800p for the past four weeks with it approaching its 1,629p September 2022 low which may offer interim support.

If not, the March-to-July lows at 1,534.5p to 1,473.5p could be reached into year-end as well.

Burberry’s Weekly Candlestick Chart

It is true that the Burberry’s share price is trading at oversold levels seen back in March 2020 but as long as it remains below its 1,751p early November low, it may slid further still.

Burberry’s Daily Candlestick Chart

For a bullish reversal to become a possibility, the 1,751p current November peak would need to be exceeded on a daily chart closing basis. Even then the breached 2020-to-2023 uptrend line at 1,800p would likely act at least as interim resistance.

Only a currently unexpected bullish reversal and rise above the late September high at 1,953.5p would make us question our still bearish medium-term Burberry’s share price outlook.