ii view: Burberry confidently restarts the dividend

Strong exposure to Asia and a growing number of younger customers. We assess prospects. 

Full-year results to 27 March

• Revenues down 11% to £2.3 billion
• Operating profit up 176% to £521 million
• Net debt including reported lease liabilities down 81% to £101 million
• Full year dividend reinstated at full-year 2019 levels of 42.5p per share

Chief executive Marco Gobbetti said:

"In the last three years we have transformed our business and built a new Burberry, anchored firmly in luxury. We have revitalised our brand image, renewed our product offer and elevated our customer experience while making further progress on our ambitious social and environmental agenda. In spite of Covid-19, we achieved our objectives for the period and delivered a strong set of results in FY21, ending the year with good full-price sales growth. In this next chapter, supported by these foundations and the strength of our teams, we will accelerate our growth and deliver value creation while continuing to build a more inclusive and sustainable future."

ii round-up:

Founded in 1856 by Thomas Burberry, today Burberry (LSE:BRBY) has become a global luxury brand with annual sales of over £2 billion. 

Its retail outlets at the end of March 2021 numbered 214 stores, 145 concessions, 56 outlets and 44 franchise stores. Retail provides its main distribution channel at 80% of sales, wholesale a further 18% and licensing the balance. 

For a round-up of these latest results, please click here.

ii view:

Under new management, Burberry began a multi-year transformation plan in late 2017. This included revamping its stores and driving digitalisation through initiatives such as enhanced social media. Now, having completed the plan, it is shifting focus towards building a more sustainable future, enhancing global diversity and inclusion, and accelerating and growing sales and profits. 

Geographically, half of its stores, concessions and outlets are located in Asia, with a further 30% across Europe, the Middle East, India and Africa; and the balance within the Americas. Accessories account for its biggest slug of sales at just over a third, followed by women’s and men’s wear at a little over a quarter each and children’s and other making up the balance.  

For investors, Western tensions with China are worth remembering. An estimated forward price/earnings (PE) ratio above the three- and 10-year averages suggests the shares are not obviously cheap, while pandemic outlook uncertainty for now leaves any share buyback programmes off management’s priority agenda.  

That said, the recommencement of the dividend at the full 2019 level is not to be forgotten and leaves the shares trading on a historic yield of around 2% - not derisory in the current ultra-low interest rate era. The recovery in sales over this pandemic-scarred year also offers encouragement. In all, and with the shares trading close to the consensus fair value analyst estimate of 2,073p, there's a sense that share price progress may be due a pause.

Positives: 

• Brand strength attracting new and younger customers
• Dividend payment restarted

Negatives:

• Coronavirus uncertainty
• Currency movements can provide headwinds

The average rating of stock market analysts:

Hold