Question

Burberry current metrics trend analysis? current stock price per share.

compare the trends between burberry and LVMH.

look for strength and weaknesses.

dividend policy - what is the dividend in terms of dollar/ cents? if it does not issue dividend state it. and is it strength or weakness?

beta analysis - measure of volatilaty in the market.

analyze any strengths or weaknesses of Burberry beta. Good or bad for growth?

Answer 1

The Burberry Group plc is a very popular and successful clothing and fashion line based out of London, UK (Day, 2004).
The Burberry brand also incorporates a manufacturing industry for all its clothing as well as relevant fashion accessories for a specific group.
Burberry has already made its name retailing their trademarks across branded outlets all over the world and in multi-outlet malls (Finch, 2005).
Furthermore, it already has five established brands that are globally recognized, which are:
Burberry London – the core branding image
Thomas Burberry
Burberry Brit
Burberry Sport
Burberry Prorsum (Finch, 2005).
SITUATION ANALYSIS
The purpose of designing and implementing a retail marketing plan now is to make sure that the overall sales ratio
of the Burberry brand increases on the international front. This of course can’t without first conducting the SWOT and PEST analysis on the global scale as well.
SWOT:
The core strength is established brand recognition and established trademark style. Established media and distribution network also adds up to its potency.
The major weakness arises as it is a premium product and hence can only aim for upper income families as opposed to the masses with its high price range.
It has limited spread in the Asian market. Opportunity would be China’s booming fashion industry as it could be a great venture.
Threat is from newer and cheaper brands offering same product range globally.
PEST:
There is little pressure politically on the brand. In fact it has support as Queen Elizabeth II and Prince of Wales both have given Royal grants to the brand in the past.
The European economic crisis is a great threat to the pricing of Burberry and hence calls for a repositioning of the price rationale.
There are very few social limitations in developing countries. The social cultures are very different. The apparels consumed differ demographically and culturally. The technically developed countries are the major markets to enter.
The online shopping strategies are easy to implement and expand the shopping platform.
OBJECTIVES
Business to Customer Objectives:
The smart objectives chosen for the retail marketing plan for Burberry are:
Creating awareness: The primary aim of retail marketing plan is to make sure that the chosen brand is represented visually to the target audience, hence investing in designing the store or creative magazines, giveaways, etc will be the focus of this marketing plan.
Furthermore, the marketing will be far more focused with this approach (Philip and Kevin 2006)
Another aim would be to make sure that the retailing allows the customers to ‘discover’ the product as a must-have which will deflect their attention from the pricing criteria. This can be done through focusing primarily on the product
and its quality – making the customers believe that they are investing in a product that is worth the price tag (Philip, 2008)
The final aim will be to improve the overall percentage of sales for the company both locally and internationally. This will be done through timely, intelligent and cost-aware allocation of resources with the
use of innovative management theories that will increase overall profit ratios and sales ratios (Schultz and Kitchen, 2000). Burberry’s expansion into Europe would be a smart move particularly fashion locale,
Paris and Beijing. Increasing franchising in Japan will be another smart move. The sales percentage anticipated would be at 6% in these countries.
Beta Analysis:
The concept of beta is actually very simple – it’s a measure of individual stock risk relative to the overall stock market risk.
It’s sometimes referred to as financial elasticity. It’s just one of several values that we can use to get a better feel for a stock’s risk profile.
Before investing in a company’s stock, the beta analysis allows an investor to understand if the price of that security has been more or less volatile than the market itself.
Taking decision based on a sound beta analysis will definitely enhance the portfolio performance.
Generally beta of companies is given by various reports published by investment firms. But calculation of beta can also be easily done and is very straight forward.
To calculate a stock’s beta we only need two sets of data, first, closing stock prices for the stock we are examining and closing prices for the index chosen as a proxy for the stock market. It can be BSE 500 or Sensex.
The formula for the beta can be written as:
These, Covariance and variances can be easily calculated by the use of MS Excel.
Interpretation:
The interpretation of Beta values is also easy. In simple words, if the stock’s price experiences movements greater (more volatile) than the stock market,
then the beta value will be greater than 1. If a stock’s price movements are less than the market fluctuations then the beta value will be less than 1.
And if the stock price is moving along with the market movement then the beta will be near about 1. Since beta also represents risk factor then a beta value higher than 1 will indicate more risk and in turn more expected return for investors (similar to more risk more gain funda!!!) The reverse is also true of a stock’s beta is less than 1, in that case we’d expect less volatility, lower risk, and therefore lower overall returns.
Since beta also represents risk factor then a beta value higher than 1 will indicate more risk and in turn more expected return for investors
(similar to more risk more gain funda!!!) The reverse is also true of a stock’s beta is less than 1, in that case we’d expect less volatility, lower risk, and therefore lower overall returns.
Companies’ growth opportunities are a very important determinant of their beta value. Generally firms with more growth opportunities tend to have higher betas. Since the expected growth is also associated with uncertainty and risk. For example, a firm’s growth opportunities usually depend on the new project, product development and expansion plan. But even decisions about these plans depend on information about cash flows upon project completion which has a systematic risk component. Empirically the link between a firm’s future growth opportunities and its beta has been established by various researches.
How to use Beta?
How we use beta for investment in stocks is very much dependent on our risk appetite. Like I said, beta measures a stock’s association with market movements and represents volatility and thus risk associated with that stock.
Choosing company which has beta more than 1 means we are selecting more volatile stock.
For example, an early-stage technology company’s stock will have a beta greater than 1. This company’s stock price will bounce up and down more than the market.
Definitely these kinds of companies will be riskier than, say; utility industry stocks which have low beta or beta close to 1. Of course,
here risk also implies return. Stocks with a high beta usually give a higher return than the market.
A risk-averse investor may like to look for companies which have beta 1 or very close to 1.