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Luxury fashion brand Burberry earned kudos in the style stakes and on the stock market after its carbon-neutral London Fashion Week show attracted wide-spread accolades. Shares shot up by 37p, now standing at 2137p at the time of writing. The fashion house has seen a long period of uncertainty recently, as it implements a revised strategy to combat falling sales. Over the last three months, it has reported an ‘excellent customer response’ to the first collection from newly appointed creative head, Ricardo Tisci. Sales in the quarter since the latest collection was released have seen a 4% increase, twice the amount that analysts predicted.
Burberry’s London Fashion Week show on Monday, featuring bold new designs and celebrity models such as Kendall Jenner, received rave reviews from fashion critics which has helped to boost its share price. So, is it worth splashing out on the British fashion stalwart as it continues to execute its transformation plans? Burberry’s long-term plan involves some store closures and a significant amount of investment so it remains to be seen exactly how easily it will be delivered. The fashion house does have the potential to trade on its luxury value in emerging economies such as China, however, and its attempt to improve its digital offering and emphasise its sustainability credentials has gone down well so far. It’s price to earnings ratio is 27 and its expecting to post full-year earnings growth of 7%. Analysts have an optimistic stance on Burberry right now, with two upgrading its rating to buy and the majority sticking with hold. If the fashion brand continues to see sales growth though its bold, new artistic direction, and the trade wars situation in China, does not disrupt that growth market, Burberry’s long term outlook may be bright.
At the opposite end of the spectrum, high-street retailer, French Connection, has been besieged with bad news eventually seeing share prices plummet by 12.6% on Tuesday. The troubled clothing brand, which is searching for a possible buyer, had a share price of 3200p at the time of writing. It announced that it will extend its search for someone to snap up the beleaguered chain until the end of January, causing shares to tumble. The 50-year old clothing brand has been steadily falling out of favour since it’s 1990s heyday, and its half-year update revealed that revenues had slumped 12% to £51 million. Overall shares in the group have slumped 20 percent during the last year although its pre-tax losses to the end of July have improved from £15.1 m in the same period of 2018, to £4.7m. Whether French Connection can turn around its fortunes depends very much on whether it can find a buyer, and as even Sports Direct’s Mike Ashley hasn’t been tempted, analysts are not optimistic about its long-term investment potential.
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