Burberry shares dip as firm commits to stop burning unsold goods

UK’s largest luxury goods retailer Burberry has been riding the wave of the fast expanding global luxury goods market to see its share price grow by nearly 40% over the last five years.

In the UK alone the value of this market segment expanded from €34 billion in 2013 to €54 billion only five years later. 

But the company has drawn widespread ire from the media and from a younger generation of shareholders who frequently ask is a company socially responsible before committing to buying shares? 

It has emerged that Burberry destroyed £28 million worth of unsold goods including perfume last year to preserve the exclusivity of its brand for its high paying customers. In an act that evokes pictures of Nero playing the violin while Rome was burning Burberry burned its unsold goods including fur. 

But yesterday as the clock ticks down to the start of this year’s London Fashion Week, the company made a U-turn saying it would immediately stop destroying unsalable products and would instead expand its efforts to reuse, repair, donate or recycle unsold goods. It also plans to stop using real fur on its items of clothing. Burberry’s chief executive Marco Gobbetti said the firm was “committed to applying the same creativity to all parts of Burberry as we do to our products”.

Shares dipped on the news to trade 2,096, down 134 on the day, but the size of the decline was in line with the slide in the broader market with the FTSE 100 declining 0.25% during the day. 

However, this is not making a serious dent in the share price - demand for the company’s luxury items including its signature trench coats has propelled the share price this year by almost 20%. 

Also, in the wake of the news HSBC increased its price forecast for the group’s share price this year although the consensus forecast for the next 12 months is still at about 6% below the current company share price.

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