When the highlights of a Q3 trading statement reiterate the multi-year turnaround plan you presented in November alongside an ugly profits warning (“margins won’t grow until 2021”), there’s a good chance that the growth figures and outlook will disappoint. And so we find Burberry shares 7% offside this morning, breaching multi-month lows to trade levels last seen in late July.

Reiteration of FY 2018 profits guidance (margin improvement at constant FX, highly cash generative) looks like a failed attempt to curry favour with investors who have already seen the shares rally 28% post-referendum, only to drop 15% in November and struggle for traction since. In fact, today’s breakdown may have triggered a bearish flag towards last year’s lows of 1545p (-7%).

Q3 underlying retail sales +1% was well down on H1’s +5%. Comparable store sales +2% slowed from +4% in H1 and missed a perhaps optimistic 4% consensus estimate. Reported retail sales -2% also pale in comparison to the 10% gains reported for H1.

Of note is UK retail sales growth down by high single digits, although it did face a tough comparable. EMEIA growth fell by low single digits. Growth in the US – its biggest market – was flat. A 1% negative impact from new space is also a blot, along with persistently negative key tourist spending and only a very marginal marginal reduction in tax rate from 2018 thanks to US tax reform.

Quoted savings of £60m are always good to hear and will help margins, however, this just isn’t cutting it. Growth led by Asia Pacific is also a positive given the growing affluence of the demographic. However, mobile representing 40% is an issue for a brand that sits somewhere between fashion and luxury. Online helps boosts sales and margins, but can weaken image. The brand also risks losing its lustre without an expensive bricks-and mortar presence.

Mike van Dulken, Head of Research, 17 Jan 2018