Quick Insights of Two FTSE 100 Stocks: Burberry Group PLC and JD Sports Fashion PLC

The Financial Times Stock Exchange 100 Index (FTSE 100), colloquially being termed as the “Footsie”, consist of 100 companies with the highest market capitalisation listed on the London Stock Exchange. The Footsie stocks are basically the blue-chip companies or the major companies listed in the United Kingdom. Presently it consists of companies which have global operations, so their movement reflects economic and international events as well. On 18 September 2019, FTSE 100 (London benchmark index) was trading at 7,322.24 points, up by 0.03 percent (at GMT 3:55 PM). Here we would be discussing two stocks listed on the FTSE 100 index, Burberry Group PLC, from Clothing and Accessories Sector, and JD Sports Fashion PLC from Apparel Retailers sector.

Burberry Group PLC

Burberry Group Plc is the UK-based luxury goods company specialising in leather goods and ready-to-wear items. The company designs, sources, manufactures and distributes luxury men’s, women’s and children’s clothing and non-apparel accessories through directly owned stores, wholesale and licence channels. As on July-18-2002, its shares got listed on the main market of the London Stock Exchange.

Recent News

On 18th September 2019, the company has been included in the 2019 DJSI (Dow Jones Sustainability Index) for the 5th consecutive year, achieving its highest ever score in the Index, and ranked at 3rd place in the ‘Apparel, Luxury Goods, and Textiles’ sector. The prominent international sustainability metric, the DJSI assesses a group’s environmental, social, and economic impact and is a trusted benchmark for shareholders who incorporate sustainability considerations into their investments and decision-making. In the financial year 2019, the company’s market-based emissions decreased by 43 per cent, and it procured 58 per cent of its total energy from renewable sources. The company is currently carbon neutral across its EMEIA retail stores, the United Kingdom, and Americas region operations and intends to be 100 per cent carbon neutral by the year 2022. Based on this, the company set two new, striving climate goals authorised by the SBTi (Science-Based Target initiative) for its expanded supply chain and own operations. During London Fashion Week, the company’s Spring/Summer 2020 show was accredited as carbon neutral. The company offset its effects, such as the flights of guests travelling to London exclusively for the show and the build and production of the occasion, with VSC-certified REDD+ projects which prevent conserve tropical rainforest and deforestation in the Brazilian Amazon.

17th September 2019, Italian designer Riccardo Tisci presented the company’s (Burberry) Victorian roots for the opulence British brand’s newest line at London Fashion Week on September 16, 2019, blending delicate lace with edgy street style for looks aimed at catering to different age groups.

6th September 2019, the company announced that they would begin a share repurchase programme of the group’s ordinary shares per share of 0.05 pence up to a consideration of £150 million (Maximum).

On 14th November 2019, the company will announce the interim results for the financial year 2019.

Trading Update (as on 16th July 2019)

Riccardo Tisci’s product gained decent consumer response, with double-digit percentage growth against the year-ago period, and it was broadly in line with the management expectations. Retail revenue during the period under consideration was up by 4% to £498m against £479m recorded in the year-ago period. Sales in Asia Pacific region increased by high single-digit percentage driven by Mainland China up mid-teens, EMEIA region sales grew by lower single-digit percentage, primarily supported by tourist spend, which mainly benefited the UK, and sales in Americas was flat as sales in the United States grew by lower single-digit percentage while Canada delivered a negative growth.

In the period under review, Men’s and women’s apparel sales surged by a double-digit percentage, and the group maintained stable guidance for top-line and operating margin at constant exchange rates (CER).

Financial Highlights (FY2019)

(Source: Factsheet, Company Website)

The company’s revenue was £2.7 billion and decreased by 1 per cent at constant exchange rates (CER) against the previous year data. The reported gross profit declined by 2 per cent to £1,861 million as compared with the financial year 2018 data of £1,897 million, while gross margin stood at 68.4 per cent.

Adjusted operating profit decreased by 6 per cent to £438 million as compared with the prior year data, while it remained flat at CER. The adjusted operating profit margin decreased to 16.1 per cent. Reported operating profit stood at £437 million, a surge of 7 per cent from the previous year data. Reported PBT of the company climbed by 7 per cent from £413 million of FY18 to £441 million in FY19. The attributable profit stood at £339 million. Adjusted diluted EPS stood at 82.1 pence.

Outlook

The company is into a creative transition phase to ‘new Burberry’ under Riccardo Tisci’s, as a Chief Creative Officer, purview. The group declared the financial year 2020 guidance to be generally of balanced revenue and flat operating margin at the constant foreign exchange with more weight towards the H2. The financial year 2020 is the final year of company’s transition phase rationalising its distribution network (closing 38 small retail stores in secondary locations and closing the United States wholesale non-luxury doors) further in line with the new brand vision.

Marco Gobbetti, as a Chief Executive Officer (CEO) of the company, said that the group had been retained in the 2019 DJSI for the 5th year running. On year on year basis, the enhancements that the company will be making are a testament to the lasting and deep pledge of everyone at the group to protect the environment and support the communities. All have a role in building a more viable prospect and as a group with robust creativity and values at the core. The company have the determination and will to help accomplish this goal.

The company is a founding member of the New Plastics Economy Global Commitment, which intends to remove pollution and plastic waste by the year 2025. In this regard, the company is working to remove unnecessary or problematic plastic packaging. Recently, the company introduced new viable packaging produced from 30m recycled coffee cups, through the resulting product wholly recyclable and accredited by the FSC (Forest Stewardship Council). The company is a founding signatory of The Fashion Pact and UNFCCC’s Fashion Industry Charter.

Share Price Performance

Daily Chart as at September-18-19, before the market close (Source: Thomson Reuters)

On September 18, 2019, at the time of writing (before the market close, at 3:30 PM GMT), Burberry Group PLC shares were trading at GBX 2,140, down by 1.61 per cent against the previous day closing price. Stock’s 52 weeks High and Low are GBX 2,362/GBX 1,618.50. Stock’s average traded volume for 5 days was 1,088,692.40; 30 days – 1,090,802.77 and 90 days – 1,411,767.42. The average traded volume for 5 days was down by 0.19 per cent as compared to 30 days average traded volume. The company’s stock beta was 1.58, reflecting the higher volatility as compared to the benchmark index. The outstanding market capitalisation of the stocks was around £8.90 billion with a dividend yield of 1.95%.

JD Sports Fashion PLC

JD Sports Fashion PLC (JD) is a General retailer company selling branded leisurewear. The company, through its chain of retail stores, operates in two segments being Sports Fashion and Outdoor. The sports fashion business includes brands like Kooga, Cloggs, Tessuti, Sprinter, Source Lab, JD Gyms, Kukri Sports, Getthelabel.com, Nicholas Deakins, Scotts and Chausport. The outdoor business includes a portfolio of brands such as Ultimate Outdoors, Millets, Blacks and Tiso.

On 15th April 2020, the company will announce the preliminary results.

Financial Highlights – H1 Financial Year 2020 (£, million)

(Source: Interim Report, Company Website)

For the first half of the financial year 2020, the company’s revenue surged by 47 per cent to £2,721.20 million as against £1,846.30 million in the H1 FY2019. The increase in the revenue was driven by an increase in global Sports Fashion fascias in the UK and Ireland markets. The company’s operating profit (before exceptional) increased to £199.8 million in H1 FY2020 (IFRS16) from £123.9 million in the H1 FY2019. The PBT (Profit before Tax and exceptional) surged to £158.6 million in H1 FY2020 from £121.9 million in the H1 FY2019. The PBT (Profit before Tax) surged to £129.9 million in H1 FY2020 from £121.9 million in the H1 FY2019. The company’s profit for the period stood at £98 million in H1 FY2020 versus a profit of £95.4 million in the H1 FY2019. The company’s basic and diluted earnings per share stood at 9.67 pence in H1 FY2020 versus basic and diluted earnings per share of 10.05 pence in H1 FY2019. The company’s adjusted earnings per share stood at 12.57 pence in H1 FY2020 versus adjusted earnings per share of 10.05 pence in H1 FY2019. The company’s interim dividend for H1 FY2020 was at 0.28 pence versus 0.27 pence in H1 FY2019.

Outlook

In the second half of 2020, the company continued showing positive trends in Sports Fashion while acknowledging the harder comparatives ahead. The company’s top-line and the bottom-line performance for the period have improved resulting from an increase in global Sports Fashion in the UK and Ireland markets. Though, the company’s operation would be impacted by the uncertainty created due to ongoing Brexit as it negatively impacts the company’s supply chain. The company has a huge reliance on non-UK manufactured products and have to pay extra money as an exchange cost to procure such products.

The company without considering the impacts of IFRS16 transition is well-positioned to provide profit before tax for the full-year 2020 at the top end of market expectations of £402-£424 million.

Share Price Performance

Daily Chart as at September-18-19, before the market close (Source: Thomson Reuters)

On September 18, 2019, at the time of writing (before the market close, at 3:45 PM GMT), JD Sports Fashion PLC shares were trading at GBX 715.20, up by 0.76 per cent against the previous day closing price. Stock’s 52 weeks High and Low are GBX 730/GBX 318.50. Stock’s average traded volume for 5 days was 2,610,950.00; 30 days – 1,505,904.70 and 90 days – 1,459,724.02. The average traded volume for 5 days was up by 73.38 per cent as compared to 30 days average traded volume. The company’s stock beta was 0.80, reflecting significantly lower volatility as compared to the benchmark index. The outstanding market capitalisation was around £6.87 billion and with a dividend yield of 0.24%.