Markets

Why shares in Burberry are down again

Burberry reported solid growth for the first half of the year yesterday, but its shares closed down almost 10 per cent at 1,787p.

Investors were unconvinced by new CEO Marco Gobbetti's ambitions to take the brand more upmarket, with optimism dented by memories of rival Mulberry's failed move away from affordable luxury to a high-end position.

There was also no mention in Burberry's results or strategic update of chief creative officer Christopher Bailey's departure or who would replace him, leaving the market unsure who would be creatively steering Gobbetti's "brand-first" vision for the company.

However many in the fashion industry believe Phoebe Philo, currently creative director of Céline and formerly Chloé, will succeed Bailey.

Read more: Christopher Bailey is bowing out of Burberry

Today Burberry shares slid again, and were down 3.5 per cent at 1,724p at mid-morning.

In addition to continuing weaker sentiment from yesterday, UBS issued a downgrade on the company this morning. Analyst Helen Brand changed its rating from "buy" to "neutral", citing the higher costs anticipated as part of Gobbetti's strategy.

"The payback of this investment will be improving like-for-like growth," she said. "But visibility is limited here with no Creative Director even yet announced."

However she said that the renewed focus on digital channels was an "appropriate strategy" to attract new consumers and millennials.

Bernstein also cut its rating on the stock to "underperform".

Read more: Growth returns to the fashion industry after 14 months of decline

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