Burberry share price has dipped after earnings: what next?

Burberry Group share price slipped by over 3% today as the luxury goods company published a strong trading statement that came out short of expectations. It slipped to 1,052p, inside the range in which it has been stuck at in the past few days.

Burberry Group shares drop after earnings

Luxury goods companies are doing relatively well recently, with most of them crediting the US market for their success. Watches of Switzerland published strong numbers earlier this week as acquisition rumours continued.

A day later, Richemont, which owns Cartier, reported some of the best earnings reports, pushing its stock in South Africa and Switzerland to an all-time high. 

In a statement today, Burberry said that its sales continued growing last quarter, continuing a turnaround that has been going on in the past few months. Its retail sales rose by 5% in the quarter to £455 million, while the comparable retail sales rose by 5% after contracting by 1% in the same period last year. The stock dropped because the comparable sales were weaker than what analysts were expecting. 

In a statement, the management pointed to the growing sales in the Americas and Greater China, and its recent “Portraits of an Icon” campaign. It also noted that its market share in outerwear and scarves was holding on strongly. 

Americas sales rose by 12%, while the Greater China and Asia Pacific rose by 9% and 3%, while its performance in the EMEIA fell by 3%. The latter happened because of the US-Iran war, which affected its business as travel to the region dwindled. The management expects that its business in the region will rebound.

Another reason why the company’s growth is happening in Asia and Americas is the booming stock market, with indices in the region hovering near their all-time highs. In most cases, luxury goods businesses do well when the financial markets are thriving.

Growth to gain momentum

Burberry expects that its business will do well this year, with wholesale growing by high-single-digit percentages in H1’27. It also expects to save £100 million this year, with £80 million of this having been achieved.

At the same time, the company expects to spend about £120 million in capital expenditure as it seeks to boost its brand image. In a statement, the CEO said:

"For the first time in three years, we saw growth across our Womenswear, Menswear, Accessories, and Childrenswear divisions, anchored by the outperformance of Outerwear. Our strategy is working."

Burberry share price technical analysis

BRBY stock chart | Source: TradingView

The daily chart shows that the BRBY stock price has slumped in the past few months, moving from a high of 1,377p in January to 1,063p today. It has remained below the ascending trendline that connects the highest swings since January.

The stock has failed to move above the 50-day and 100-day Exponential Moving Averages (EMA). At the same time, the stock remains slightly above the key support level of 1,025p, its lowest swing in May and July. It has formed a descending triangle pattern.

Therefore, the stock will likely continue falling, potentially to the psychological level of 1,000p. In the long term, however, the stock will likely bounce back as the sector stabilizes.