Decisions of investments in the stock exchange - The case study of Burberry

Résumé du document

Burberry was founded in 1856 in Basingstoke (England) by Thomas Burberry. So, investors can consider that the company has a unique heritage associated with Great Britain because many people consider that the brand represents an authentic British lifestyle. First, let's take a look at the history of the firm:

1891: Burberry's retail business expanded to London when a shop opened in the Haymarket selling outerwear to sportsmen.

1910: the first French store was opened on the Boulevard Malesherbes, the site of the current store, in Paris.
1912: the Burberry store in the Haymarket moved to its present location at 18/22 Haymarket which today serves as the corporate showroom.

1924: George Mallory selected Burberry apparel when he attempted his ascent of Mount Everest.

1955: Burberry was acquired by GUS.

Extraits

[...] And the latest represent a huge part of the turnover. The company has made big efforts to modernise its brand image and this involved new international advertising campaign, new stores all over the world and particularly in developed countries with a high level of life like in Kuwait, in Russia or in Asian countries (Hong Kong, Singapore But we can notice that the firm is really expanding since the arrival of Thomas O'Neil in November 2001. He was the worldwide president of the company until July 2004. [...]

[...] You can keep them for their dividends but you have to be very attentive to the evolution of the share. The better choice will be to sell them and to buy other shares. Burberry's shares cannot be a security share because of the market volatility; they only can be shares with which everybody can play on the stock exchange. In fact, it will be too risky to buy it because nobody knows how Burberry will perform in the future. [...]

[...] The expansion of the company is certainly due to its new position on the market and to its new product, but it can also be partly due to the novelty effect. Burberry has indeed benefited from the expansion of the luxury industry all over the word but it has also benefited from the fact that it proposed something new, totally different from what they proposed before. That explains why its image and its turnover have skyrocketed when the other brands remain quite stable. [...]

[...] Since mid August the share has had a bullish trend. On the 7th of February, the share price is Is the valuation share fair? We can use PER ratio: PER = Market price of share / Earnings per share Market price 7th February / Earnings per share end 2004= 394.44 / 19.1 = It is quite difficult to obtain such information from other luxury groups to make a comparison. However, it seems that Burberry PER is quite high. Future trend Because of 2004 share trends we may assume that 2005 trend will in best case remain at this level or will probably decrease The first issue is that roughly £400 per share is not a fair valuation of the firm In luxury industry acquisitions are a usual phenomenon so it is possible that groups such as LVMH, Gucci Group or Richemont try to takeover the firm. [...]

[...] This improvement was result of a strong trading performance improved stock management. During 2002 /2003, the company invested 4.5 m in its own shares as a contribution to funding the Group's employee share ownership trusts. The company paid an interim dividend of 1.0 p per share on 5 February 2003. A final dividend of 2.0 p per share is proposed and would be payable in august 2003. During 2003/2004, the company invested 6.6 m in its own shares; the company paid an interim dividend of 1.5 p per share on 4 February 2004. [...]