FTSE 100 stocks trading at 52-week lows present an interesting situation for investors. A discounted share price creates buying opportunities that can potentially propel a portfolio to new heights. But that all depends on why a stock’s trading so cheaply.
Often, being priced at the lowest point within a year can be a blaring signal of weakness. And if there are genuine problems that have compromised operations, such a bargain could likely be a trap. So when looking at Burberry Group (LSE:BRBY), which is it?
A changing of the guard
Burberry’s a well-known brand within the luxury fashion sector. In fact, it’s one of the oldest in Britain, dating back to 1856. And throughout its history, the firm’s gone through periods of success as well as failure. In 2024, shareholders seem to be going through another round of the latter.
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Shares are down more than 70% over the last 12 months. And apart from reaching a 52-week low, the stock also reached a 15-year low. What happened?
Being a luxury fashion brand during a cost-of-living crisis isn’t easy. And management took a risk to change the brand’s creative direction to try and spark interest from new customers. But the result was lacklustre, while simultaneously unappealing to existing Burberry customers sending the financials even further south.
Needless to say, the recent strategic decisions at Burberry were a big error. And it’s unsurprising Jonathan Akeroyd has subsequently been kicked out of the CEO post. Taking his place is Joshua Schulman, former CEO of US fashion giant Coach.
Given his previous success, there’s hope that Schulman can turn things around. And he’s certainly been given some incentive with a £3.6bn recruitment bonus dependent on hitting shareholder value creation targets over the next three years.
What to watch?
Despite all the chaos, Burberry’s scarves and trench coats are still seemingly popular. They’ll be the star of its outerwear campaign launching in October this year as part of the turnaround strategy. Meanwhile, the group’s busy revamping its digital customer experience by making several improvements to its online store. And to top things off, management’s rolling out cost savings across the business to help offset the impact of inflation.
This all sounds rather positive. But the details are a bit vague, and it’s far too early to determine whether this strategy’s delivering results.
Management expects to see improvement in the second half of its 2025 fiscal year ending in March. However, given the recent series of bad decisions, shareholders are keeping Burberry on a very short leash.
At around 650p, the FTSE 100 stock trades at a price-to-earnings ratio of nine. By comparison, the industry average across Europe’s closer to 20. That certainly looks like a bargain, but only if Schulman’s successful. And as previously stated, it’s just too early to tell. Therefore, I’m keeping Burberry shares on my watchlist for now.
