Mindful Money’s weekly shares watch: Burberry, Persimmon & Debenhams

13th April 2015


Wednesday sees Burberry deliver its latest market update and shareholders will be eager to hear how the luxury fashion retailer is holding up in the face of a number of headwinds.

Sheridan Admans, investment research manager at The Share Centre, who lists the stock as a ‘buy’, notes that in its last report the company said it was relatively cautious, despite good sales numbers in Europe, America and the Middle East.

Looking ahead to this week’s fourth quarter trading update, he says: “The concern was that European economies remained weak and Chinese growth was moderating. However, this time around the disruptions in Hong Kong should not feature and there could be a catch-up of sales to Asian consumers.”

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers expects that the group’s retail division will again have driven sales, “buoyed by ongoing digital initiatives and its Americas business”.

He says: “An easing in currency headwinds and further new store openings are also likely to have aided performance. On the downside, previously highlighted third quarter difficulties in Hong Kong will have dampened overall performance, while current pre-tax profit estimates of £447m on a consensus basis suggest a marginal decline compared to the prior year.”

Ahead of the news, and with the share price having outperformed the wider FTSE-100 index by more than 20% during the last year the wider analyst opinion currently points towards a ‘strong hold’.

The renaissance across the UK’s housing sector is predicted to continue, albeit at a slower pace going forward. As a result Admans asserts that management of some of the house builders remain cautious – and investors in Persimmon, which publishes its latest interim management statement on Thursday will be keen to hear how many houses it sold in the first three month of the year.

Admans, who is calling the firm a ‘hold’, says: “We expect these to be encouraging given that forward sales in the first few weeks of 2015 were up 5% on last year. A sign of how confident the company is on its future prospects will be based on the size of its land bank and any further acquisitions it makes, so any comments on this will be worth noting.”

Ahead of the update, and with the shares up a strong 34% over the past six months alone, the analyst consensus has cooled over recent months to a ‘hold’.

Thursday also sees Debenhams reports its half-year results. The group’s new focus on full price sales is expected to stay in focus. Bowman highlights that reduced promotional activity and unseasonal autumn weather saw like-for-like sales for the 19 weeks to the 10th January fall by 0.8%, although he notes management’s increased focus on online sales generated a record sales performance for the seven days prior to Christmas.

Looking ahead to its report, he adds: “Half year like-for-like sales are expected to have fallen, while currency headwinds, given the group’s Danish Magasin business, are likely to drag on profitability, with analyst forecasts for half year pre-tax profit pointing towards a 3% increase year-over-year to £88m. Prior to the announcement and with the retailer recently offering little near term inspiration, analyst opinion currently denotes a ‘weak hold’.”

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