My Burberry (LSE: BRBY) shares are in the black! I’m sitting on a £52.67 gain and I’m thrilled.
Please don’t laugh. I know it’s not much.
I bought the luxury fashion brand inside my self-invested personal pension (SIPP) and this paper gain won’t stretch far in retirement. But it puts me in a much better position than just one month ago, when I was staring at a loss of around 35%.
The Burberry share price is the fastest riser on the FTSE 250 over the past month, climbing 42%. After the pummelling I took, that feels like a win. It’s up 6.5% over one year but down more than 50% over two.
Like almost every Burberry investor, I’ve had a rough ride. In January 2024, it issued its second profit warning in three months after a tough Christmas, as the cost-of-living crisis hit sales worldwide.
Crisis brings a reset
I sniffed a bargain and bought the stock in May 2024 at 1,157p, half its value one year before. The shares continued to slide, so I averaged down 1,042p a fortnight later then 859p on 3 July. Unfortunately, 15 July brought more misery.
The shares crashed 15% in a day as Burberry issued a fresh profit warning and ousted CEO Jonathan Akeroyd with immediate effect.
First-quarter store sales plunged 23% in the Americas and Asia Pacific, with further falls elsewhere. The dividend was suspended too. That was a big reason for me buying the stock.
At least new CEO Joshua Schulman had a plan. He said the brand had got too niche and needed to reconnect with its broader luxury heritage by focusing on “timeless, classic” styles.
The first signs of progress came on 14 November. Half-year revenues fell 22% to £1.08bn but the stock jumped as Schulman pledged to cut costs by £40m, address the inventory overhang, and drive annual revenues to £3bn “over time”.
Investors want to believe
On 14 May this year, Burberry posted a £66m full-year loss after revenue fell 17% to £2.46bn. But the stock still rose. Investors were responding to the prospect of change, not the actual number.
Brokers at Barclays lifted their price target from 720p to 1,000p, saying Schulman’s strategy meant the risk of brand dilution was now less likely. That’s actually lower than today’s 1,100p.
Seven out of 21 analysts say Buy, while 11 say Hold. Like Barclays, they’re not exactly beside themselves with excitement.
Time to walk away?
Clawing my way back into the black means I can sell without a loss. That’s emotionally satisfying, and would free up cash for new opportunities. I’m sorely tempted.
The early part of a recovery is often the sharpest and the fun may be over for now. . The lack of a dividend is another negative. This is still a tough sector. The economic climate is uncertain, and Burberry could stall. Investors have put a lot of faith in Schulman’s words, but now he has to deliver.
If I was starting from scratch, I wouldn’t buy Burberry today. On those grounds, I’ll consider selling instead. I won’t just bank my £53 profit, but the thousands I put in. I think the money could work harder elsewhere.
