Burberry (LON:BRBY) share price sell-off intensified this week after the company warned about its growth. The stock has crashed in the past four straight weeks and is now hovering at its lowest level since November 2020.
It has plunged by more than 51% from its pandemic high, lagging behind other brands like LVMH (EPA:LVMH), Hermes, Kering (LON:0IIH), and Richemont (LON:0QMU). This performance is a sign that Burberry is having serious growth concerns.
Burberry slowing sales
The UK is not doing well as most of its companies continue to underperform their European and American rivals. The FTSE 100 index, which just turned 40 years old, has trailed behind the likes of FTSE MIB, DAX, and CAC 40.
Similarly, British manufacturing is shrinking while its luxury brands have lost their market share. Companies like Aston Martin Lagonda and McLaren cannot be compared with their peers like Ferrari (NYSE:RACE) and Porsche (ETR:P911_p). Similarly, it is hard to compare Burberry with the likes of Hermes (LON:0HV2) and LVMH.
In a statement on Friday, Burberry said that its sales were lower than expectations. Its retail revenue retreated by 7% in the fourth quarter to £706 million. In this period, comparable store sales retreated by 4% after expanding by 1% in the same period in 2022.
The company also expects that its annual revenue will be worse than expected. In a statement, Jonathan Akeroyd, the CEO noted that it experienced deceleration in December as luxury demand waned. It expects that its operating profit for the year will be between £410 million and £460 million. It also expects a currency headwind of about £120 million.
This performance means that Burberry is facing more headwinds than its peer luxury goods brands like Kering and Hermes. It is also a sign that the company is having execution problems, which are hard to solve.
In a previous note, I wrote that luxury brands will likely bounce back this year because of the surging cryptocurrencies and global stocks. In most cases, people who make a fortune in these assets tend to spend on luxury goods. This tailwind, together with the possibility of rate cuts in the US and Europe, mean that these companies will likely do well this year.
However, at this stage, it is hard to be confident that Burberry will implement its turnaround well. I believe that such a turnaround should be implemented when the company is in private hands. In this case, while a bid has not been made, I can’t rule out a situation where Burberry is acquired.
Burberry share price forecast
The weekly chart shows that the BRBY stock price has been in a freefall after peaking at 2,570p in 2022. It has now crashed to below 1,200p. Most recently, the shares dropped below the key support at 1,385p, the lowest swing in May 2022. This was a make-or-break price level.
Moving averages are also not sending a good sign as they are about to form a death cross. This is a bad sign that forms when the 50-week and 200-week moving averages make a bearish crossover pattern. In most cases, it is usually followed by more downside.
Therefore, the outlook for Burberry share price is bearish, with the next reference level being at 930p, the lowest swing in 2020.