It’s been a wild ride for the Burberry (LSE:BRBY) share price over the course of 2024. Even though the trend has mainly been lower, it’s experienced a sharp 40% spike over the past month. I’ve passed on the chance of purchasing the stock so far, but it’s worth me checking again to see if something has materially changed.
Takeover rumours
I can see two clear reasons why the share price has jumped over the past few weeks. The first one is based on speculation of a potential buyout. Various media outlets have reported that fashion house Moncler has expressed interest in buying Burberry. This would tie in somewhat with the specialist outerwear that both of them make.
Even though Moncler has denied it’s interested, rumours persist and it doesn’t surprise me. After all, the stock is still down 48% over the past year. It hit levels not seen since 2009 during the summer. Although I’m careful not to explicitly say it’s cheap, there’s clearly value there if you believe in the long-term story of the brand.
Turnaround time
Another recent factor helping the stock was the interim results, released last week. This might seem odd, as the finances showed an operating loss of £53m for the period. This was a big flip from the £223m profit posted this time last year. A 22% drop in revenue also isn’t great.
However, the focus from investors was on the ‘Burberry First’ strategy that was announced, with the intention of providing “a strategic plan to reignite brand desire, improve our performance and drive long-term value creation.”
Clearly, it’ll take time to see if this plan can make the business great again. But judging by the short-term reaction from the share price, investors took the message well.
Long-term view
When I last wrote about Burberry, my conclusion was that I thought it would take time for the business to get back on its feet. As a result, I wanted to keep my powder dry to pick the right moment to invest.
I don’t really feel like the situation has changed since then. Of course, the above two factors might change some people’s opinion. But in my view, nothing has fundamentally changed in the past month.
A takeover may or may not happen. That point I can park to one side as there’s nothing really for me to get excited about right now. As for the announcement of the new strategy, again little has actually happened so far in terms of performance improving.
If we get a trading update in the New Year that shows initial cost-cutting measures have gone well, along with better festive season sales, then I’ll consider investing. I accept that I might miss out on some share price gains before then. But in terms of the risk relative to reward, I think it’s the sensible choice for me.
