Thoughts on Burberry after they destroyed their inventory?


#1

Bought some Burberry as part of my Freetrade portfolio.

On recent news thinking I should sell it.

What do you all think?


The latest on the rollout
#2

Probably hold Burberry if they are going to extreme lengths to protect the brand.


#3

Good point! More irritated by the cynicism of it tbh.


#4

I was thinking whether they’ll have some backlash from PETA etc but nothing so far.

Does anyone know if that 28.6m was cost or retail price? If it’s retail then it might be a few thousand items vs hundreds of thousands of items.

I think I read somewhere that Burberry executives get healthy allowances and discounts on Burberry products, so they could have given more to them…


(Alex Sherwood) #5

I reckon they’re using the retail price because it makes a better headline & obviously the margin on perfume is huge..

The FTSE 100 company said last year was unusual as it had to destroy a large amount of perfume after signing a new deal with US firm Coty.

As Coty would be making new stock, Burberry had to dispose of £10m worth of old products - largely perfume.


(Vladislav Kozub) #6

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 @alexs has also indicated.


(Christopher) #7

@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 @toby, 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.


#8

@vlad / @alexs 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.


(Alex Sherwood) #9

Thanks so is that at cost or the retail price?


(Vladislav Kozub) #10

Shall we get Burberry out of the rollout, please?


(Alex Sherwood) #11

Done :slight_smile:


(Vladislav Kozub) #12

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:


#13

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.


#14

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


#15

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.


#16

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