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Burberry (BRBY) shares are looking anything but luxurious this morning, holding the UK Index wooden spoon as shareholders vent frustration at disappointing underlying Q2/H1 growth. A weak wholesale segment (revenues -14%) seen persisting into the second-half is something investors simply can’t ignore (25% sales) especially with the risk that issues in the US (uneven demand) and HK (China visas, FX moves) continue.
Management citing a still ‘challenging external environment’ only adds to the poor outlook as traders look through Retail resilience, upwardly revised full-year FX gains from a Brexit-dented pound sterling and unchanged pre-tax profits guidance. A weaker USD helping the GBP/USD to near 3/4-day highs is certainly not helping on the translation front while continental European weakness (domestic growth offset by less tourists) counters same-store UK sales up a whopping 30% in Q2.
The trading update has ensured the shares vacate 2016 highs. All downhill from here, or just a bump before the post-Brexit uptrend resumes?
Mike van Dulken, Head of Research, 18 Oct
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