Burberry (BRBY) 🧥

In accordance with IAS 2, which is an International Accounting Standard for inventory (that’s my accounting degree speaking here if I remember that one correctly), when you write inventory off, it must be valued and reported at the cost of production.

However, I would not think that BBC cares for it, they need drama and £28m is a huge figure if represents cost. I am very much inclined to say they mean the sales value of the products, jsut as @anon2636484 has also indicated.

4 Likes

@saf, a welcome return to the Angela Ahrendts days to refocus the company’s brand proposition perhaps? I am with you, it would be hard to justify a sell off based on a commercial decision seeking to improve overall company performance. Though if you have a strong position on the ethical implications of waste and overconsumption @Freetrade_Team, then I can see why you might want to offload.

A greater concern for me would be a significant slow down in their growth markets stemming from the insanity of a looming trade war. Though could make for a good opportunity to buy in.

2 Likes

@vlad / @anon2636484 the 28.6m figure is from their Annual Report:

The cost of finished goods physically destroyed in the year was £28.6m (2017: £26.9m), including £10.4m of destruction for Beauty inventory.

1 Like

Thanks so is that at cost or the retail price?

1 Like

Shall we get Burberry out of the rollout, please?

3 Likes

Done :slight_smile:

1 Like

Seems like the actual cost of production, which means the retail value would be much more. Well, at least they are compliant with the reporting standards!

Thank you :slightly_smiling_face:

3 Likes

Think it’s cost value, as in their 200 page Annual Report it’s noted under the Inventories section, and under ‘Accounting policies’ it says:

Inventories are stated at the lower of cost and net realisable value. Cost consists of all costs of purchase, costs of conversion, design costs and other costs incurred in bringing the inventories to their present location and condition.

3 Likes

What was your investment thesis when you bought it? ie has recent news changed the outlook for that thesis?

2 Likes

An interesting brand with global exposure and high quality design IP. Guess that hasn’t changed, but my issue was really the sheer wastefulness of the company.

3 Likes

Good news:

  • They’ll stop burning unsold goods, with immediate effect
  • In the future they will no longer use rabbit, fox, mink and Asiatic racoon fur in their collections

Source: Burberry stops burning unsold goods and using real fur

8 Likes

Retail sales fell 45% due to lockdown. Wholesale sales down around 50%. They also expect second quarter to be impacted.

1 Like