Quiet luxury is out and that's great news for Burberry
After a wild and scary ride, we are back to breakeven in our Burberry position. This gives us the option to check out of the British fashion icon without any undue portfolio damage, but it is early in the turnaround sought by chief executive Joshua Schulman. For the moment, we are inclined to give him and the company the benefit of the doubt, even if the headline financial figures do not entice at first glance.
This month's first-quarter trading update was no great thing of beauty either. Comparable store sales for the three months to June fell 1pc year on year at the retail arm, and that came on top of a 21pc plunge in the equivalent period a year ago. Yet that was still better than the analysts' expectation of a 3pc decline. Moreover, it does seem as if things have stopped getting worse, and if they have stopped getting worse then at some stage they might just start getting better – especially if Mr Schulman's plans to reinvigorate the brand and product ranges come to fruition. At least 'quiet luxury' is out, according to this columnist's daughter's editions of Vogue, and a return to favour for luxury would at least provide a more encouraging backdrop, despite the uncertain macroeconomic environment.
Last year's operating loss and absence of a dividend mean investors have to buy into the turnaround plan for them to be even vaguely optimistic about Burberry's share price maintaining its momentum – it is up 85pc in a year and by more than double from the autumn 2024 lows. A price-to-earnings ratio of more than 80 for the year to March 2026 and forecasts of a 6pc operating margin show just how much work the luxury goods specialist has to do after a terribly difficult two years.
Analysts only expect a 12pc operating margin by March 2028, well below the 20pc-plus return on sales generated by leading plutocratic product makers such as LVMH and Richemont. A return to the 16pc level that prevailed between 2016 and 2021 would leave Burberry on 17 times 2028 earnings, and a dash to 20pc would put it on a tempting 13 times. Again, we are long way from that, but the worst may be behind Burberry and patience could yet get a reward.
Questor says: Buy
Genus (GNS) £24.75
We are off to a fast start with Genus and already have a paper gain of around 25pc to show for our initial analysis back in spring. This month's year-end update reads well and offers more than enough hints to suggest that our investment thesis for the genomics expert is still on the mark.
The trading statement revealed that adjusted pre-tax profit for the year to June 2025 would be at least £72m, even though unhelpful foreign exchange movements cost the company some £8.4m.
Of Genus' two divisions, Pig Improvement Company (PIC) continued to perform strongly, and the bovine-oriented American Breeders Service (ABS) showed some signs of improved momentum. In the latter case, things can hardly get any worse given that US cattle inventory languishes at 70-year lows. Any upturn here could bring benefits to ABS. Its expertise in genomics helps dairy farmers increase the chances of cows giving birth to female calves suitable for dairy production or young more suited to beef production.
Perhaps most importantly of all, the trading statement flags the first tangible benefits of American regulatory approval from the Food and Drug Administration (FDA) for Genus' PRRS (Porcine Reproductive and Respiratory Syndrome) Pig Resistant Programme (PRP). FDA approval opens the way to the commercialisation of PRP and is already triggering milestone payments from partner companies, as evidenced by the £3.7m received from Beijing Capital Agribusiness.
Such payments should help cash flow, too, and, as a result, chief executive Jorgen Kokke signals a reduction in net debt in this month's update. This is a further boost for the investment case, as Genus' record for free cash flow generation in the past few years is spotty at best. If the investment in PRRS starts to pay off, then cash flow could blossom and a reduction in debt would reduce net interest costs and provide a further kicker to profits growth.
As it is, the forecast of £72m in pre-tax income for the fiscal year just ended would be a record for the FTSE 250 index member, yet the share price still stands at less than half 2021's peak, even after the recent run.
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'Any shop is a target' Meanwhile, at a Sainsbury's Local in crime-ravaged Croydon, South London, trendy Beavertown Neck Oil Session IPA beers selling for £2.25 are also fitted with security tags, as are cans of Sainsbury's gin and diet tonic costing £1.70. Down the road at Boots, entire displays of make-up products worth as little as £3 per item are fitted with anti-theft tags, and three security guards patrol the store. Shelves of confectionery are protected behind specially installed plastic security grills. Experts warn that users of sites such as Vinted, eBay, Facebook Marketplace and TikTok may be unwittingly buying stolen goods. Andrew Goodacre, CEO of the British Independent Retailers Association, is calling for internet giants to do more to stop organised gangs selling their wares online. 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