Jim Armitage: Burberry learns the hard way to play it straight with investors
The world of luxury is all about conjuring: the magical creation of desire that tempts customers to pay over the odds for your product.
The trouble is, amid all the celebrity endorsement and mythology that requires, it’s easy for its practitioners to forget to be prosaic when dealing with investors.
That’s the most charitable explanation I can think of for Burberry’s unfortunately phrased profit warning this morning.
Rather than tell it straight — profits are going to be worse than expected — it said they’d be “broadly in line with the average of those analysts who have recently updated forecasts”.
Not that you’ll find out from Burberry’s statement, but that would be the analysts who have slashed profit expectations from £462 million to £445 million.
Unfortunately, the City smelled the rat.
The shares tanked within seconds.
It’s a clear message for Burberry and its brokers Nomura and Bank of America Merrill Lynch: cut the bull.
