Shares of Burberry (LON: BRBY) are trading about 6% lower compared to yesterday’s high after the company reported falling sales for the third quarter.
Fundamental analysis: Lockdowns impacting sales again
Luxury fashion house Burberry said its underlying sales dropped by 9% in the quarter ended December as it was forced to close shops due to the coronavirusLON pandemic. The company also raised concerns about disruption in coming months as new variants of the virus have emerged.
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After the coronavirus outbreak last year, Burberry’s sales plummeted 45% before the company managed to gain some ground thanks to stronger demand in China and South Korea. However, new outbreaks and variants are bringing back the risk of uncertainty, Burberry said.
The fashion house said that 15% of its stores were currently closed and 36% operated with new restrictions. The Q3 decline in sales of 9% was even worse than the 6% in Q2.
“We expect trading will remain susceptible to regional disruptions as we close the financial year,” the company said.
Burberry added that it feels confident about recovery once the pandemic eases, thanks to the company’s resonance with younger consumers and robust demand in South Korea and mainland China. In those areas, quarterly digital sales in Burberry soared more than 50%.
Burberry said its same-store sales across Europe, the Middle East, India and Africa plunged by 37%, pressured by shop closures and lockdown restrictions, as well as a weak tourist activity in Europe. However, the company’s sales grew by 11 in the Asia Pacific over the same period.
Technical analysis: Shares move lower
Burberry stock price initially moved higher yesterday to trade in the region of 1850p before rotating lower to hit 1745p today. Overall, shares are now trading about 2% lower in January after making similar gains a month earlier.
The price action is now creating a series of the lower highs and lower lows as sellers look to push for a test of the 100-DMA at 1635p. A break above 1920p on the upside would open the space for a push towards 2300p.
Summary
Burberry said its sales fell by 9% in the quarter ended December and warned about potential disruption in the future as new variants of coronavirus have emerged.
