Despite the FTSE 250 gaining 6% over the past year, some constituents have performed much worse. Burberry Group‘s (LSE:BRBY) a good example, becoming a potential value stock following the move late last summer to fresh decade lows. Yet with a sharp jump today (16 January), it’s certainly back on people’s radar.
Key reason behind the rally
It might surprise some to find out that the business hasn’t released any regulatory news or financial results today. Rather, the spike can largely be attributed to the release of results from Richemont, the luxury holding group which owns a host of brands ranging from Cartier through to Montblanc.
Earnings showed a relatively unexpected 10% jump in sales during the festive shopping season versus the previous year. Analysts had expected growth to be flat during the quarter.
The Americas and Europe helped to drive the strong results. The 7% drop in sales from Asia Pacific wasn’t as bad as expected either.
Richemont stock jumped as much as 18% following the news, with other stocks in the luxury sector gaining too. For Burberry, some of the gains are simply from the follow-on impact of this.
Naturally, some investors might think the results could be a sign that the slowdown in the luxury market is coming to an end. If correct, then Burberry could start to show better financial performance later this year.
Turnaround time
It’s unusual to see such a large move for a stock based on results from another company. Yet for Burberry, it’s been so battered over the past year that it does have a lot of headroom to quickly move higher. The move so far today means that the share price has rallied 58% in just the past three months. Despite this, it’s still down 11% in the last year.
It still has ground to make up from the past couple of years of disappointing share price losses. The turnaround plan via its new CEO Joshua Schulman, detailed back November, has proven to be somewhat of a catalyst for the stock. At that point, a cost-saving plan was introduced with the aim of saving tens of millions of pounds to help the firm.
Should we be in a scenario where the efficiency drive is progressing well, alongside a pick-up in demand for products, then the stock could be set for a strong 2025.
The calendar ahead
A trading update is due out in just over a week’s time. This could be very important in deciding the direction for the coming few months for the share price.
I feel that investors might have seen enough already to decide Whether or not to buy this value stock. Some might still be on the fence. In that case, waiting until the financial update could be a smart move before deciding whether to get involved.
This post was originally published on Motley Fool
