The Motley Fool

FTSE 100 fashion stock Burberry sees shares lifted by Q3 results. Would I invest?

Image source: Getty Images

FTSE 100 constituent Burberry (LSE:BRBY) released its Q3 trading results this week. Unsurprisingly its sales have been affected by the pandemic, but the brand still boasts a strong and loyal following. It also shows signs of recovery and strength in its appeal to a new and younger market. But the British luxury brand will likely face ongoing headwinds in the coming months, so are shares in Burberry a good investment today?

Burberry’s Q3 sales slip

In Q3, full-price sales enjoyed double-digit growth and increased in rebounding markets across the Americas, Mainland China and Korea. But the pandemic continues to pose problems. Overall, underlying sales fell 9%.

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...

Some 49% of Burberry’s stores are fully open, with the rest operating with restrictions or closed. The FTSE 100 company expects full-year trading to improve as its gross margins benefit from full-price inventory sales. It’s reducing its costs according to plan and is successfully reducing inventory.

US sales fell 8% year-on-year, meanwhile sales across Europe, the Middle East, India, and Africa (EMEIA) fell 37% due to store closures and a reduction in tourism. Nevertheless, the Asia-Pacific region enjoyed a hike in sales growth of 11%, which is encouraging.

Meanwhile, digital sales saw 50% full-price growth and Mainland China saw a triple-digit rise in digital sales. 

The Marcus Rashford effect

Burberry is known for its innovative advertising campaigns and shrewd marketing strategies. Its festive collaboration with footballer Marcus Rashford was particularly positive for the brand. Rashford is a spokesperson and advocate for ending child poverty and supporting youth-related causes. His ability to make a difference has been steadily mounting throughout the pandemic.

Marcus Rashford FTSE 100 Burberry campaign

Source: Burberry

His wholesome, philanthropic image is a great asset to Burberry. And this was clear by the success of its social media engagement during his campaign.

A FTSE 100 stock for the future

The FTSE 100 company is also investing heavily in improving its sustainability rating. In Q3 it achieved its highest ever score in the 2020 Dow Jones Sustainability Index. High fashion remains one of the worst contributors to environmental destruction. In that vein, environmental, social and corporate governance (ESG), is increasingly important to investors. Therefore, publicly listed companies must embrace it if they want to be a viable addition to an ESG conscious investor’s portfolio.

Burberry is doing just that. It’s focusing more closely on diversity, the use of renewable practices, and has done its bit in supporting the Covid-19 relief effort by manufacturing PPE at cost.

That’s all good news. But with key customer China going back into lockdown and the virus still ravaging the world, the next few months will likely pose a challenge. However, as a long-term investment, I think Burberry looks like it will recover. The rise of the affluent Chinese consumer is likely to continue to attract new customers to the brand, and it’s got its finger on the pulse of the digital age.

But Burberry’s price-to-earnings ratio is a high 61, earnings per share are almost 30p, and its dividend yield is a low 0.6%. As much as I think this is a great FTSE 100 company with a sustainable business, I think its shares are expensive and won’t be investing for now.

For regular stock market investing ideas and help with choosing the best UK shares to buy now, sign up to The Motley Fool today.

One stock for a post-Covid world...

Covid-19 is ripping the investment world in two…

Some companies have seen exploding cash-flows, soaring valuations and record results…

…Others are scrimping and suffering.

Entire industries look to be going extinct.

Such world-changing events may only happen once in a lifetime.

And it seems there’s no middle ground.

Financially, you’ll want to learn how to get positioned on the winning side.

That’s why our expert analysts have put together this special report.

If the pandemic has completely changed our lives forever, then they believe that this stock, hidden inside the tech-heavy NASDAQ, could be set for monstrous gains...

Click here to claim your copy now — and we’ll tell you the name of this US stock… free of charge!

Kirsteen has no position in any of the shares mentioned. The Motley Fool UK has recommended Burberry. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Where to invest £1,000 right now

Renowned stock-picker Mark Rogers and his select team of expert analysts at The Motley Fool UK have just revealed 6 "Best Buy" shares that they believe UK investors should consider buying NOW.

So if you’re looking for more top stock ideas to try and best position your portfolio in this market, then I have some good news for your today -- 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.