Equities Update: Burberry, Primark, Harbour Energy…

Maybe a takeover is exactly what Burberry needs. But for now, the company remains out of fashion

 
Garry White, Chief Investment Commentator at Charles Stanley, comments:
 
“Burberry’s third-quarter results saw some signs of brightness for the troubled company,  Management said it was now more likely its second-half results will broadly offset the first-half operating loss, compared to its previous guidance at the interim stage which said it was “too early to determine whether our second-half results will fully offset the first-half adjusted operating loss.”

“When the turnaround strategy was launched at its interim results in November it focused on the rebalancing of its product range and inventory levels. The company has been left with too much stock to discount and this lack of scarcity has been damaging the brand as well as a lack of focus on its core outerwear category. But Mr Schulman also said the company had all it needed to “reignite brand desire”. With sales lower year on year in all regions but the Americas, there is little evidence of this emerging so far.

“The company has been surrounded by bid talks for some time, but nothing has emerged. Perhaps Burberry as a brand may be better off within a larger group with better distribution instead of being a stand-alone company. Maybe a takeover is exactly what Burberry needs. But for now, the company remains out of fashion.”

Primark slashes outlook as UK sales lag

Adam Vettese, market analyst at investment platform eToro, says: “Primark parent company Associated British Foods continues to struggle as UK sales had a tough autumn partly due to mild weather. Not even a festive uptick could offset poor trading in the months prior and one could argue it’s become particularly concerning for a retailer that is very much a cornerstone of the UK high street. Cost of living has been a concern for some time but with Primark’s value offering at low prices we might have expected a little more resilience in these conditions.

“The outlook now for low to mid single-digit growth will not do much to excite shareholders who have already seen the price slashed by 30% since May last year. This update also comes hot on the heels of a broker downgrade earlier in the week.

“Many investors may look for discounted stocks and see value in the recovery. Yet unless we see some kind of turnaround, shares could fall further in the meantime.”

Harbour Energy’s transformative acquisition doubles production, but have they taken on too much debt?

Mark Crouch, market analyst at investment platform eToro, says: “Harbour Energy’s latest trading update marks a pivotal moment in the company’s history. Following the acquisition of Wintershall DEA in September last year, Harbour Energy’s growth trajectory has taken a dramatic upturn, more than doubling production almost overnight. The UK’s largest independent oil and gas company’s revenue and free cash flow potential is now being realised. Revenue almost doubled in 2024 to over $6bn being significantly boosted in the last quarter.

“Investors will rightly be cautious about the debt Harbour has now taken on. Only twelve months ago Harbour held a net cash position, so taking on such a large debt burden is sure to raise eyebrows. However, Harbour’s track record of successful acquisitions and debt management provides confidence. The blueprint remains consistent: boost production, pay down debt, and return value to shareholders.

“Harbour is now knocking on the door of the FTSE 100. The company was briefly promoted to the top tier of the UK’s businesses back in 2022 but was swiftly relegated following the crash in oil prices. This time however, Harbour Energy is over twice the size so failing an oil shock, promotion to the FTSE 100 will likely just be a matter of time.”