Today I am looking at two blue-chip beauties with terrific growth potential.
Clothing colossus
Fashion house Burberry Group (LSE: BRBY) has seen its share price slump to multi-month lows after warning on profits for the current period.
The clothing emporium said recently that it expects pre-tax profit in 2017 “to be around the bottom of the range of analysts’ expectations” around £405m, a forecast that reflects Burberry’s “continued expectation that the demand environment remains challenging and that underlying cost inflation pressures persist.”
Burberry saw comparable sales slump 2% between October and March, caused by a 5% decline in demand during the last quarter. While the company saw sales droop in Europe and the Americas, Burberry’s dependence upon Asia Pacific is proving to be the main headache.
Demand in this region fell by mid-single digit percentages during the six months, the London designer advised, with sales in Hong Kong collapsing by more than a fifth for the third quarter on the bounce in January-March.
Still, the firm’s latest release illustrates the excitement that its new product lines can generate — Burberry said that its new season runway rucksack had “performed well,” while strong demand for its scarves, ponchos and Banner bag sales underline the brand’s enduring strength.
And while macroeconomic choppiness may dent group sales for a little while longer, I expect Burberry’s togs — supported by store expansions and digital service improvements — to surge higher in the coming years as wealth levels in its growth regions explode.
A technological titan
Gadgets goliath Apple (NASDAQ: AAPL.US) was broadly expected to shock the market with its latest sales update on Tuesday. And while the numbers were not as bad as many had feared, this did not prevent the share price collapsing 7% on the day.
Apple advised that quarterly sales dipped 13% during January-March, to $50.6bn, the first top-line decline since 2003. This came in at the lower end of Apple’s previous guidance of between $50bn and $53bn, and of particular concern was the massive demand decline for the iPhone. Sales of the smartphone toppled to 51.2m units in the first quarter, down from 61.2m a year earlier.
There is no doubt Apple is suffering as market saturation dents smartphone demand, a phenomenon that is also affecting the tablet PC segment — total iPad shipments slipped to 10.3m devices in the second quarter from 12.6m a year earlier.
But Apple’s latest update was not all bad. The Watch has already proved a huge success in its first year, with the wrist device performing better than the iPhone had during its own first year of existence. Meanwhile, strong app and music demand pushed turnover at the firm’s Services division 20% higher between January and March.
And I believe Apple has what it takes to get its traditional sales drivers firing again. The Cupertino business has long set the standard in terms of creating fashionable, cutting-edge tech. And KGI analyst Ming-Chi Kuo set the rumour mill rolling last week by announcing Apple will reboot iPhone sales with the launch of a curved, all-glass version in 2017.