The share price FTSE 100 luxury firm Burberry (LSE: BRBY) was firmly in the red this morning. Based on today’s full-year numbers, some may find that surprising.
Full-year numbers
Naturally, the coronavirus pandemic was always going to leave a mark. Revenue at Burberry fell 30% over the first half of the last financial year due to the company needing the close its stores as many countries around the world went into lockdown. Travel restrictions also meant that trade from tourists was heavily impacted.
In the second half of the year, however, sales bounced back by 8%. The fourth quarter was particularly good with comparable store sales almost returning to the levels seen in FY19. This was despite 16% of Burberry’s estate remaining closed. Full-price sales were also 63% higher than over the same three-month period in the previous year as a result of decent trading in China, Korea and the US.
All this leaves revenue down 10% (£2.34bn) for the year to 27 March. That’s really not too bad considering the challenges the firm has had to face. What’s more, full-price comparable store sales rose 7% as a result of an “excellent response” to new products, innovating selling formats and Burberry succeeding in attracting new, younger shoppers. Adjusted operating profit of £396m was down 8% at constant currency compared to the previous year. However, this actually beat the consensus forecast of £378m.
Dividend delight
There was more good news for shareholders. Although not really known for its income credentials, Burberry said that it would reinstate its full-year dividend to 42.5p per share. Based on the share price as I type, that gives a yield of 2.2%.
Commenting on today’s numbers, CEO Marco Gobbetti reflected that the company had achieved its objectives for the period despite the pandemic. Considering this, one might wonder why the Burberry share price tumbled 10% this morning. Since the COVID-19 headwind was already known, I wonder if at least some of this is due to the outlook provided by the company.
Where next?
Looking ahead, Burberry said that it expects revenue to increase “at a high single-digit percentage compound annual growth rate”. This will be supported by “continued outperformance of full-price sales“.
However, the sticking point for the market appears to be down to margins being impacted in the short term due to increased investment. As a buy-and-hold investor, that doesn’t bother me, but it does seem to have put off those with more limited time horizons. Some profit-taking is perhaps inevitable.
Ongoing fears surrounding rising inflation won’t have helped either. On a different day, Burberry’s share price may have proven more resilient. However, today’s reaction does underline just how quickly sentiment can turn.
Long-term hold
As frustrating as today’s setback to the Burberry share price is, I’m not about to sell my stock any time soon. Although past performance is certainly no guarantee of future returns, I’m led by what the company has achieved over many years rather than over a short trading period. On that basis, this remains a high-quality company with strong returns on capital and solid finances. Besides, those buying exactly one year ago would still be 42% up!
Far from running for cover, I think today represents another opportunity for me to add to my position.
