Proactive Investors - Run By Investors For Investors

PREVIEW: Shorts in fashion at Burberry

Not those kinds of shorts ... we mean short sellers
Burberry shop
Punters are betting Burberry's results will disappoint

This season we will be mostly wearing shorts

Fashion firm and former stock market darling Burberry Group PLC (LON:BRBY) is in the sights of the short sellers.

According to financial information services provider Markit, Burberry currently has 7% of its shares shorted ahead of it earnings update on Wednesday.

“The company has been hit by slowing demand from emerging Asian markets, most specifically China, which sent its shares tumbling last year. Short sellers have been actively adding to their position as the firm’s shares retreated in earnest, but demand to borrow its shares has retreated from the highs seen earlier in the year when 9% of Burberry shares were out on loan,” Markit said.

“Until last year, Burberry was the strongest and fastest growing soft luxury clothing company in the world, beating such competition as Gucci, Prada and Louis Vuitton,” noted Michell McGrade, chief investment officer at TD Direct Investing.

McGrade said there are expectations of a 4-7% decline in profits.

“With Chinese consumers accounting for 40% of total sales, the luxury retailer is still very much dependent on a strong appetite for luxury goods in the country. Luckily for Burberry, Chinese spending abroad will continue to grow this year, despite slowing growth in its economy and the Paris/Brussels terror attacks - which led to a reduction in tourists travelling to Europe (travel is a fundamental driver for luxury consumption with at least 45% of sales in the sector attributable to travellers),” McGrade noted.

SABMiller: it's not bitter

SABMiller is in the process of being acquired by Anheuser Busch Inbev SA, so its final results will really be, in all probability, its final results.

Aside for the passing of an era for a company that was pretty much prepared to brew any beer you liked so long, the results are largely academic, although beer bores will be interested to see whether there are any signs of the craft ale revolution continuing to erode the dominance of lager.

SSE's last results ahead of the Energy Supply review

Utilities provider SSE's results come out one month ahead of the Competition and Markets Authority's final decision in its Energy Supply review.

Broker Whitman Howard expects the Authority's decision to be “reasonable” but notes SSE still faces many other potential head-winds, including wholesale energy price movements.

“The previous trading statement had confirmed its target for adjusted basic EPS of 'at least 115p' for FY 15/16E, and this was finessed up in the March update, now indicating 'adjusted earnings per share of between 117 and 119 pence' for FY 15/16E,” noted utilities analyst Angelos Anastasiou.

Anastasiou is forecasting adjusted pre-tax profit of £1.52bn, and earnings per share (EPS) of 119.1p. The all important dividend is expected to creep up to 89.5p.

Significant announcements expected

Interims: Patisserie Holdings PLC (LON:CAKE), Solid State PLC (LON:SSP)

Finals: Assura Group Limited (LON:AGR), Burberry Group PLC (LON:BRBY), HICL Infrastructure Co Limited (LON:HICL), SABMiller PLC (LON:SAB), SSE plc (LON:SSE)

Trading statements: UBM PLC (LON:UBM


© Proactive Investors 2019

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use