The Motley Fool

Is Burberry Group plc still the best fashion stock after today’s fall?

Fashion giant Burberry (LSE: BRBY) has seen its share price receive a hammerblow on Tuesday after the release of its latest trading update.

The high-end fashion play announced that underlying revenues slipped 4% during April-September, to £1.6bn, although like-for-like sales at its retail channel ticked 2% higher from the corresponding 2015 period.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Although sales declines are never cause for cheer, today’s release gave multiple reasons for investors to be optimistic. While trading troubles in Hong Kong and Macau persist, Burberry has seen total retail sales improve in recent months — the retailer recovered from a 3% decline in the first quarter to punch a 2% rise between July and September.

Looking elsewhere, Burberry noted that “digital continued to outperform in the half, with growth in all three regions,” helped by recent improvements to its website. And the London designer also lauded the success of its new product ranges, with its runway rucksack and new Bridle bag spreaheading growth across its bag collections.

On top of this, Burberry also advised of a positive currency boost going forward. Owing to its vast international bias, the firm said that full-year profits would receive a bump to the tune of £125m should sterling remain at the levels seen on October 12.

Ted talk

I believe today’s share price crash at Burberry has been influenced more by heavy profit taking than an adverse reaction to Tuesday’s trading numbers.

The fashion colossus has seen its share price explode 25% since June’s EU referendum, even after today’s 8% decline, as investors have sought stocks with vast global exposure. The company even touched 14-month tops of £15.10 per share just last week.

I retain a bullish take on Burberry’s investment potential, and believe growing personal income levels in its hot growth regions — allied with rising investment in developing its already-stellar brand — should underpin stunning earnings growth in the years ahead.

But Burberry isn’t the only game in town for fashion hunters.

Fellow Londoner Ted Baker (LSE: TED), for example, is able to beat the top-line turbulence whacking luxury designers like Burberry thanks to its focus on the premium segment.

Ted Baker’s total revenues grew 14.4% during the first half of the fiscal year, to £259.5m, with sales in Asia and North America surging by double-digit percentages and demand in its key European region rising 8.5%.

Like Burberry, Ted Baker is also witnessing incredible online activity, with e-commerce sales advancing 29.7% in the period. And both companies are also expanding their global store networks to underpin future sales growth.

So which is best?

Well neither Ted Baker nor Burberry can be considered cheap on paper. An expected 13% earnings rise this year leaves the former dealing on a P/E rating of 22.6 times. And Burberry — which is expected to record a 2% bottom-line advance — deals on a multiple of 19.3 times, some way above the FTSE 100 average of 15 times.

Ted Baker’s stunning sales momentum may make it a preferred pick for many stock selectors, particularly as Burberry still has a lot to do to get sales really motoring again. Still, I believe both fashion plays are great picks for long-term investors.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US $12.3 TRILLION out of thin air…

And if you click here, we’ll show you something that could be key to unlocking 5G’s full potential...

It’s just ONE innovation from a little-known US company that has quietly spent years preparing for this exact moment…

But you need to get in before the crowd catches onto this ‘sleeping giant’.

Click here to learn more.

Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Burberry and Ted Baker plc. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.