Burberry share price held steady today, Nov. 13, after the company published encouraging financial results that demonstrated its turnaround efforts was starting to bear fruit. BRBY jumped to 1,253p, from this month’s low of 1,137p.
Burberry Forward strategy is working
There are signs that Burberry’s turnaround strategy is working after the company published encouraging results. In a statement, the company said that its revenue dropped slightly to £1.03 billion last quarter. It eased by about 5% YoY, while its comparable store sales was flat.
The results also showed that the operating margin improved to 1.9%, while its operating loss improved to £50 million. Before that, the company had an operating loss of £184 million as its woes continued.
One of the most important aspects of its numbers is that China returned to growth, mirroring the performance of LVMH and other luxury goods companies like Kerng. Its comparable store sales in China rose by 3%, higher than its combined 2%. The Greater China segment’s comparable store sales in China was minus 5%.
Burberry is now in the process of implementing the Burberry Forward turnaround strategy. This approach includes having a customer-centric approach, focusing on Timeless British Luxury identity, and increasing its focus on the outerwear segment, especially tartan scarves. In a statement, the company said:
“Our focus this year is to build on the early progress we have made in reigniting brand desire, as a key requisite to growing the topline. We expect to see the impact of our initiatives build as the year progresses.”
The plan has also involved painful decisions, including hundreds of layoffs in a bid meant to lower costs.
Still, some analysts are cautious about the industry. For example, in a recent note, analysts at Berenberg said that the luxury supercycle was over. The analyst said:
“Luxury is at an inflexion point. We believe that the industry faces a structural demand problem, and that after three decades the luxury supercycle is over.”
The company is also facing competition pressures, especially from local Chinese brands that have become popular among the residents.
Burberry share price technical analysis
BRBY stock price chart | Source: TradingView
The daily timeframe chart shows that the BRBY stock price bottomed at 553p in September last year and reached the current 1,256p.
It has jumped above the 50-day Exponential Moving Average (EMA), a sign that bulls are prevailing. Indeed, the Bull Bear Power indicator has moved above the neutral level.
The stock has also jumped above the upper side of the ascending triangle pattern, which is a common bullish continuation sign.
Also, the Relative Strength Index (RSI) and the MACD indicators have continued to move upwards in the past few weeks.
Therefore, the most likely scenario is where the BRBY stock price continues rising as bulls target the psychological level at 1,500p, which is about 20% above the current level.
On the other hand, a move below the psychological level at 1,200p will invalidate the bullish Burberry forecast and point to more downside, potentially to the psychological level at 1,000p.
This invalidation is possible as the stock has formed a triple-top pattern, which is one of the riskiest patterns in technical analysis.
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