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FTSE 100 jumps as inflation rises but Burberry slumps 7% after update

Discussion in 'Market News' started by Lily, Oct 18, 2016.

  1. Lily

    Lily Forum Member

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    Luxury goods group benefits from pound’s fall but wholesale disappoints

    Leading shares have recovered ground, helped by commodity stocks rebounding as metal and oil prices rose, partly due to some weakness in the dollar.

    But Burberry has missed out on the gains, falling 114p or more than 7% to £13.98 following its latest update. The luxury goods group said the slump in the pound had boosted sales to tourists in its London stores by 30%. In all it reported a 2% rise in like for like retail sales in the second quarter. However its wholesale revenues missed forecasts, which has prompted some profit taking in the shares. Analysts at Liberum issued a sell note, saying:

    A solid second quarter update, as expected, albeit against weak comps...Burberry is a beneficiary of weak sterling and if £/$ stays at current levels will see a £90m benefit over 2015/16. £50m of this is already in our forecasts.

    Wholesale was weak, down 14%. We expect similar in the second half as US department stores remains depressed. Foreign exchange benefits aside, Burberry struggles to drive meaningful growth. Long term earnings per share compound annual growth rate is low versus the peer group while the valuation remains at a premium.

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