Why Do Rumors Of Selling Happen To Burberry?

The sale rumors are not reliable every time, one time after another, it is ironic. A little bit of industry experience and even common sense people, if willing to spend 0. seconds to respond, do not have to think about it, rather than "turn around first".

But looking back, we have to ask why such a rumor happened on Burberry, not Louis Vuitton.

Gucci, Gucci, Prada, Prada, Hermes

Or even in the latest "rumor" of the buyer Coach?

Let's have a good chat about why.

The most famous international company in the world, when sales rumors are over, there are undoubtedly the following points:

1) the company's performance is bad, continuous loss, or even on the verge of bankruptcy. It needs to be restructured through sale.

2) in the critical or bottleneck period of development, the company needs to expand its scale or more market share and to rely on stronger external resources or resources.

3) join forces to become giants in the industry.

4) the controlling shareholder of the existing family or private equity fund withdraws because of arbitrage or other reasons.

If you take the above four points to Burberry and sell it, the only fit is 3.

In fact, as early as 2015, Royal Dutch Shell PLC (RDSA.L) Shell paid 47 billion pounds to buy the British natural gas group BG Group PLC BG.L (BG.L) and FedEx Corp. (BG.L) FedEx $4 billion 800 million to buy and sell the Holland counterparts, while the rumors of "selling oneself" also sounded, but the investment bank thought that such industry tycoons would be merged more and more.

The merger of industry giants has also taken place in the fashion field in recent years. For example, PVH Corp. (NYSE: PVH) bought Warnaco Group Inc. (NYSE: WRC) in 2 billion 900 million dollars in 2012, and unified the intellectual property rights of Calvin Klein and all the products. In June of this year, Revlon bought $870 million from Revlon (Samsonite), one of the competitors, and the March, the world's largest brand suitcase manufacturer, Samsonite International Co., Ltd., bought the company's $1 billion 824 million 100 thousand acquisition.

The above three typical M & A cases have their own reasons, such as the ownership of CK, the continuous loss of EA, the problem of tourism fever and the slow growth of bags and so on. Moreover, the market value of the above three pactions is not a magnitude of the Burberry PLC Boboli group. The market value of the British company is about 6 billion 500 million pounds, and the contract is 8 billion USD.

So, this is a very interesting thing. Tumi's deal is rumored that in less than a week Samsonite announced the paction, while Burberry's rumors were almost once a year, but every year they were laughed away.

In March of this year, I wrote an article about Burberry's "sell out" rumors. The conclusion is very simple, that is, the arbitrage of the capital market, and a headline called "losing more than the price is a luxury tool that has become a short-term arbitrage tool". At that time, Chanel was in the Chinese area.

The stock market chart of the above Burberry PLC Boboli group over the past three years is very intuitive. The red circle on the left is the "9. 11" share price of the luxury industry in 2012. When Angela Burberry Ahrendts, the then Burberry PLC Boboli group CEO, published the "China uncertainty theory": the new government changed its session and did not know who the gift should be sent to, so that the largest customer group in the luxury goods industry stopped spending luxuries.

The "China uncertainty theory" led to a plunge of more than 20% in the price of Burberry PLC, Bob Lee Group, and the global share price of all luxury goods groups fell by 4%, or nearly 10%.

Of course, after that, we all see that China's targeted anti-corruption and the risk of economic downfall make the whole luxury industry go on thin ice. Gucci, Prada and Chanel, including Burberry, are worse than each other.

However, following the Burberry PLC Boboli group meritorious CEO Angela Ahrendts joined Apple Inc. (NYSE:APPL) Apple Corp, the Christopher Bailey of the designer came from generation to generation in 2014, and the share price of the Burberry Bailey bolberry group went down all the way, and even once approached the 10 pound pound.

The red ring on the far right is the latest low point of Burberry PLC Boboli group. In the past three months, the group's share price surged, including Christopher Bailey's resignation to CEO and last week's "sell out" rumor, a 6% rise and 8% rise.

So the reason why "sell out" rumors happen frequently in the Burberry PLC Boboli group is very simple, because the company's share price is low, P/E is around 20 yen, and this is P/E after the recent surge in stock prices. From the 90 day after the announcement of Christopher Bailey's downfall, Burberry PLC's Bo Bo Li group's share price has soared 21.47% so far.

20 of P/E and Coach Inc. corp group are similar, but the Coach Inc. group's performance is also good in this year's performance. However, the P/E of the two companies is lower than LVMH SE and Kering SA, even worse than the worst performing listed luxury group, Prada, which is better than the industry's lowest. However, only 11 of them are generally not optimistic, and are in the downside, especially after the recovery of the company.

Of course, low P/E or low share price is not the only standard for investment. In fact, there is an investment concept that is the higher the P/E and the stock price, the more worth investing, such as the Amazon Inc., Amazon. From the first quarter of 2014, we No Agency thought that Michael Kors Holdings Ltd. had no investment value.

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The purpose is clear. Then we will analyze the inevitable cause of Burberry instead of Chanel.

1) controlling shares

There are many luxury goods groups in the market. Several traditional luxury goods groups are basically controlled by the family. LV's Arno, Pino, Gucci's three big families, Jewish brothers of Chanel, even Prada Prada's husband and wife are obviously not willing to sell. Most of them are buyers of the luxury goods market.

Although the luxury market is not good, the basic brands can still generate a considerable amount of cash flow, and the brands that can always be strong in the market are already there.

The Burberry PLC and Coach Inc. Inc. are the most dispersed two luxury companies, so the difficulty of the paction is much easier. The more market rules are, the more dispersed the shareholders and shares are, the easier it is to trade, and everyone wants to make profits and the price is right, so they are willing to arbitrage.

In fact, Coach Inc. has also become the leading character of the rumor in the past two years. The rumor is that the buyer is LVMH SE, but it is also a rumor.

On the other hand, the number of institutional shareholders is also causing the fact that it is easy to get "hearsay" and arbitrage.

2) poor performance and management

Over the past three years, the British luxury group Burberry PLC Boboli group has had the worst three years, compared with its remaining British counterparts, Mulberry Group PLC MUL.L (MUL.L) Mai Baorui, who lost three years of gold due to the wrong strategy of the "top line" of former CEO Bruno Guillon, which is now slowly recovering.

However, Mulberry is not the same as Burberry in terms of scale, popularity and industry status. What's more, Mulberry has a large controlling shareholder.

Burberry PLC Boboli group's bad three years, from the departure of Angela Ahrendts to Christopher Bailey, the management of the group has not been recognized by shareholders.

Christopher Bailey was forced to resign after listening to the "downfall" voice of CEO.

The key appointment made the Burberry PLC Bo Bo Li group feel that the market has gone through a wrong two years. In the downturn of the luxury goods industry, the two years of adjustment will undoubtedly be punished. Its share price is on the one hand, the group from CEO to Chairman, from Japan to the United States, from management to strategy is awarded nothing.

No Agency should belong to the most critical pair of critics of Burberry PLC Boboli group. Fortunately, it was right again.

Under such circumstances, it is logical to sell, replace CEO and board of directors in the market.

However, the luxury market as a niche market, Burberry brand less than 10, and is still continuing to make profits, and the depreciation of the pound has helped the company's practical ability. Burberry PLC boblie group is not bad enough to be reorganized to save it. In fact, Prada SpA is worse than it, and there is no way to see Prada SpA.

Coach Inc. Cox's previous situation is similar, but the new CEO took over after the pformation, the result is also visible.

3) industry and company status

The whole luxury industry has begun to stagnate and the future is full of uncertainties. Although Bain, who has been reporting, thinks that the market will still grow 1-2% every year, but this is only expected. In fact, Bain's expectation every year is optimistic and the update report is more pessimistic.

So is the luxury industry's investment still as profitable as it used to be?

No matter from the primary market or the two tier market, it is hard to give a positive answer now. LVMH SE's acquisition of Loro Loro Piana and Bvlgari's big deal can not be said to be a very successful case. The recent acquisition of Riomva, and the acquisition of Italy's advanced bicycle brand Pinarello by the joint venture investment fund L Catterton Catterton, including the sale of Donna Karan International, shows that the investment in the luxury market is moving from a positive balance to a positive one.

For Coach Inc. Cox Chi and Burberry PLC Boboli group, such large groups are facing a downward trend of profitability. Even if Coach Inc. is recovering, the market expects its earnings to continue to grow, but profits in the next three years will not return to the previous three years.

If the exchange rate is not considered, the Burberry PLC Boboli group may face the same problem.

At this time, as the buyer's LVMH SE is becoming a seller, it is hard for the whole industry to go against the trend. In fact, every luxury group is facing problems. Even if Gucci Gucci performs so well, the problems of its parent company are quite numerous. The balanced development problem has not been solved. Of course, LVMH SE has similar problems.

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4) strong combination

Is this the only reason that can reasonably explain why Burberry PLC Boboli group sells itself to Coach Inc. Cox group?

But it is also necessary to see whether win-win is the right time.

To a certain extent, the two sides can complement each other. For example, the strength of Coach Inc. Cox group in North America can make up for the US weakness of Burberry PLC Boboli group; Burberry PLC Boboli group can supplement the high-end category of Coach Inc. group.

In addition, both sides are relatively stable in finance. The cash flow of Coach Inc. Cox group is far from enough to buy Burberry PLC Boboli group, but it can be concluded through comprehensive pactions such as leveraged paction or stock swap and cash, just like the previous Yoox SpA's acquisition of Net-a-Porter Group.

So can the merger of Coach Inc. Cox group and Burberry PLC bobury group form a synergy to achieve a win-win situation?

These two groups have different management styles and brand strategies, and there are no similar cases of similar merger and success in the luxury market.

Even with the paction of Samsonite and Tumi Inc., Samsonite has acquired nearly 10 small brands before, regardless of LVMH SE, Kering SA, and Lifeng group. They are all ladder like brand architectures, with large, medium and small brands balanced.

As a result, the risks and uncertainties of Coach Inc. Cox group and Burberry PLC PLC Bo Bo Li group are totally unanticipated even in pactions. In the current poor market conditions, this risk is probably not borne by any of the two companies.

Let's talk about timing. First, the luxury market is not good. First, is the luxury market bottoming out? Will it be cheaper after another financial crisis?

5) can we sell it to anyone?

I also want to talk about the last question. Burberry PLC Boboli Group continues to sell "rumor" though it is basically the reason of arbitrage, but will the company really sell itself in the future?

In fact, we can see that the British luxury group may also be one of the Burberry PLC Boboli group, which has been developing the same Aquascutum, Jaeger, Mulberry and so on, but ultimately failed to break through and move towards a higher level.

Burberry PLC Boboli group was reborn from Rose Marie Bravo Ross Mary Bravo, relocating from licensing mode to retail mode, and then upgrading and positioning internationally under Angela Ahrendts. It has gone through 20 amazing years.

Today, the Burberry PLC Boboli group has a market capitalization of $8 billion, plus a trading premium of $10 billion. Who can digest such a high sum?

Private equity funds, which are private funds of this magnitude, are few and far less interested in retailing.

LVMH SE or Kering SA, from the present point of view, is obviously unlikely that all two brands will be aligned with the Burberry scale.