Burberry Share Price Sinks After Earnings – Buy the Dip?

The Burberry share price crashed by more than 7% after the fashion company reported mixed financial results. It is trading at 1,936p, making it the worst performer in the FTSE 100 index. Other laggards in the index are commodity companies like Rio Tinto, Royal Dutch Shell, BP, Anglo American, and BHP Group, among others. 

Burberry earnings: Burberry is a major luxury retailer that operates globally. Like most retailers, the company faced significant challenges as the pandemic led to a closure of most stores. In a statement today, the company said that its sales remained below its 2019 levels. Its sales for 2020 declined from more than 2.6 billion pounds to 2.3 billion pounds. Its reported operating profit rose from 189 million pounds to 521 million. 

Still, there are signs that its business is recovering. For example its comparable same-store sales increased by 32% in the fourth quarter that ends in March. The firm expects its revenue to grow hy high single digits. It also expects to exits markdowns that have affected its brand for years. In a statement, the company said:

“In the last three years, we have transformed our business and built a new Burberry, anchored firmly in luxury. In this next chapter we will accelerate our growth and deliver value creation while continuing to build a more inclusive and sustainable future.”

In the past few years, the firm has pivoted to China, which is the fastest-growing geography. Still, it must balance between its interest and that of the country’s leaders. For example, recently, H&M has found it difficult to operate there due to boycotts.

Burberry share price forecast

The daily chart shows that the Burberry share price has been in a recovery mode after it declined sharply in the first half of 2020. The shares are even approaching their highest point in 2020. Along the way, they have moved above the 61.8% Fibonacci retracement level. 

Today, the shares gapped lower and moved below the lower side of the ascending channel. It also moved below the 25-day and 50-day exponential moving averages. Therefore, the bearish breakout means that the outlook is relatively bearish. This means that the stock could slide to the 50% retracement at 1,680p. On the flip side, a move above 2,000p will invalidate this trend,

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Burberry share price

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