FTSE 100 incumbent Burberry (LSE:BRBY) is a world renowned luxury clothing and accessories brand. Could it be a fashionable investment for my holdings though? Let’s take a closer look.
Iconic brand
Burberry is a luxury brand originally created in 1856 by Thomas Burberry. It is best known for its stand out check design which often features on its clothing and accessories. Burberry sells its luxury goods via its own directly operated stores, department stores, and speciality retailers throughout the world.
As I write, Burberry shares are trading for 1,751p per share. The shares are trading very close to the same levels seen at this time last year, 1,727p. Interestingly, the Burberry share price rose to 2,264p in June. Burberry has a huge presence in China and a big bulk of its revenue stems from the Asia Pacific market. Issues in China during 2021, linked to the ongoing pandemic and worries over growth, caused the shares to drop off.
For and against investing
FOR: Burberry’s most recent results and its dividend record are encouraging. An interim report released in November for the half-year period ended September 30 made for excellent reading. Burberry reported revenue, profit, and cash flow all increased compared to 2020 levels. It also declared a dividend of 11.6p per share. Burberry has a decent track record of dividend payments. When the market crashed, many FTSE 100 firms cancelled dividend payments. Some firms are still yet to resume them. Analysts predict Burberry’s dividend for FY23 could be 53p per share. In 2016, Burberry paid 37p per share. A growing dividend is a major plus for me.
AGAINST: Concerns of slowing growth in the Asia Pacific market, especially China are a concern. China accounts for close to 40% of Burberry’s revenue stream. If there were to be issues in this area, Burberry’s performance and any future returns could be severely hampered.
FOR: A recent change in chief executive officer (CEO) is a positive for me. Jonathan Akeroyd is replacing Marco Gobbetti. Akeroyd’s wealth of experience and success during his time with other fashion brands such as Alexander McQueen and Versace will be beneficial for Burberry. A fresh pair of eyes and a new impetus could help Burberry increase performance. This could lead to further returns for investors.
AGAINST: I find myself noting that a major risk for most of my prospective investments is the pandemic and its ongoing impact. The pandemic is not over and there has been evidence of new variants recently disrupting many industries and markets, such as the FTSE 100. Burberry could also suffer, as it did when the pandemic first struck and this could affect any returns for investors and potential investors alike.
FTSE 100 stock I would buy
Overall I like Burberry and would add shares to my holdings at current levels. It has a deep history of tradition as well as a profile and presence recognised the world over. In addition, it possesses a favourable track record of performance and dividends. I understand past performance is not a guarantee of the future, however. The change in CEO and reopening post-pandemic could propel Burberry to new heights. Burberry is a FTSE 100 stock I would buy for my portfolio.