Over the past year, the Burberry (LSE:BURB) share price has fallen almost 21%. Last week it traded at fresh 52-week lows below 1,550p. Although the shares closed the week slightly higher at 1,562p, it’s hardly close to levels seen above 2,000p only last month. So is this a bargain I should consider buying at the moment?
Why the Burberry share price has fallen
There has been a lot going on over the past year at Burberry, but also within the past month. In my opinion, the share price has struggled with both long- and short-term factors at play.
For example, the company wasn’t helped by the surprise announcement back in October that CEO Marco Gobbetti was going to step down. Even though the shares actually rallied slightly on the announcement itself, I think the net result was a negative for the business. His replacement, the experienced Jonathan Akeroyd, is only starting in April. So a leadership vacuum until next month can’t have been great internally.
Another factor weighing on Burberry shares over the past month has been the situation in Ukraine. It has taken the step to temporarily close stores in Russia. However, I think a bigger issue here is the investor sentiment around what the invasion means going forward. The impact on energy prices and other commodities (take a look at the wheat price) means that household costs around the world will rise.
In this case, consumers feeling the pinch will cut back on luxuries in favor of necessities. This could hamper revenue at a luxury fashion house such as Burberry just as its costs rise.
Recent results paint a strong picture
Despite the negativity mentioned above, I think there are reasons to consider buying Burberry shares. The Q3 trading update in January was entitled “momentum builds”. The numbers were good overall. This was shown as “full-price sales continued to grow at a double-digit percentage compared with two years ago, accelerating from the previous quarter and reflecting a higher-quality business.”
I think the company will also benefit going forward from being able to operate without any Covid-19 restrictions. Even if distancing requirements remain in place in APAC for some time, I don’t see any major disruption as seen in 2020 and 2021 with actual store closures. In this mix, I think it’s also important to note the in-person runway show last Friday. This was the first in-person show for the brand since before the pandemic.
As for the outlook, the company expects the current year to see operating profit growth of 35% compared to last year (on a constant exchange rate basis). If Jonathan Akeroyd can provide a smooth takeover at the top, and the strategy to push more towards younger consumers pays off, then I think the Burberry share price should be moving higher in years to come.
So will I buy? Well, maybe. If risk sentiment remains fragile due to Eastern Europe then the Burberry share price could continue to struggle. Therefore, I’m going to put Burberry on my watch list, to consider buying shares over the next month.
