Burberry Share News (BRBY)

(Sharecast News) - Burberry sales disappointed slightly over the festive quarter but the fashion house maintained that it was successfully building "brand heat" ahead of the launch next month of its new creative director's debut collection.Revenue of £711m was produced in the 13 weeks to 29 December, down 1% compared to the equivalent period last year and down 2% if exchange rates effects are taken out. Group store space shrank 1% with two net closures in the quarter but analysts were expecting a number nearer £724m.Like-for-like sales rose 1%, a noticeable slowdown from the 3% achieved in the first six months of the year and below the average analyst forecast of 2%. The performance, however, is based on the previous collection in store that does not yet reflect the company's new positioning under chief executive Marco Gobbetti, who joined a year and a half ago, and creative chief Riccardo Tisci, who joined last March.Gobetti, who still remains in the first phase of his multi-year plan to transform and reposition Burberry further upmarket, claimed good progress had been made in the quarter as "we built brand heat and continued to shift consumer perceptions, while maintaining our focus on our financial and operational objectives".The "heat" came from the festive ad campaign, a collaboration with Vivienne Westwood and monthly 'product drops', where to limited-edition products designed by Tisci were sold predominantly through social media.Gobetti said these B-Series collections "resonated strongly with new and younger customers" and quantified the level of warmth by citing social media stats, including more than 1m additional followers in the quarter across Instagram and China's WeChat and a more than 50% improvement in reach on WeChat.On the sales numbers, the group LFL store growth was said to have come from a consistent performance across regions, with mainland China continuing to grow by mid-single digits as it did in the first half, while the Europe, Middle East, India and Africa region making a "small improvement" in tourist spending quarter on quarter after a flattish first half. Analysts said this would partially be due to the ongoing yellow vest protests as France accounts for around 5% of sales.The Americas region was surprisingly hit by softer footfall trends, following a first half when it grew mid-single digits."I am pleased with our progress in the quarter as we continued to build brand heat around our new creative vision and shift consumer perception of Burberry," said Gobbetti. "Excitement is growing ahead of next month's launch of Riccardo's debut collection. We will continue to manage the business dynamically as we reposition the brand."He confirmed the outlook for the full year and that the £100m cost savings plan is on track.Burberry shares, which earlier this month sank to a 10-month low, picked up more than 2% to 1,821p on Wednesday.Richard Hunter, head of markets at broker Interactive Investor, commented: "The rejuvenation of the iconic Burberry brand is still in its early stages, but there are clear signs that the new management team is taking the bull by the horns."As well as the "brand heat", Hunter said the good growth of the key Chinese market was reassuring, despite the current broader concerns around the potential slowdown within that economy, balanced by the uninspiring indications from the Americas, "pedestrian" growth in EMEIA and the implementation risks from the scale of the planned transformation."In the meantime, the dividend yield of 2.3% is not of particular attraction, and whilst there are clear objectives in mind on the company's rebrand, this has yet to filter through to the numbers in any meaningful way."Analyst Elena Mariani at Morgan Stanley, who has an 'euqual weight' rating on the shares, said she expected consensus estimates for adjusted PBT will "come down by low single digits" and was cutting hers by 2% as she expects "some pressure on the gross margin due to possible discounting activities on old collections in the quarter, and what might be a relatively weak LFL exit rate".She said the lacklustre momentum in LFL sales "is not going to represent a major surprise to the market given the lack of new Burberry products in stores and also the volatility in high-end spending highlighted by some peers", though America was a surprise."While shares might be under some slight pressure this morning given the small miss, what will really matter for the Burberry investment case will be the consumer reaction to the new product launches under the new creative director Riccardo Tisci, which will start to hit stores towards the end of February. We believe that monitoring any early signs of success will be key to assess a potential revival of the brand, which most likely won't result in a meaningful top-line and margin recovery before 2020-21e."