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Buying UK stocks when they’re hated isn’t easy. But luxury fashion house Burberry (LSE: BRBY) is just one example that’s delivered for those who invested when things were looking particularly grim 12 months ago.
Sales slump
Sales began to crater back in 2023 as inflation hit discretionary spending and consumers hunkered down. This was particularly evident in key markets such as China. As expected, this led to several profit warnings, pushing the share price down to a level not seen for 14 years.
To be fair, this wasn’t the only luxury retailer feeling the heat. But sentiment was further hit by the (understandable) suspension of dividends and the removal of CEO Jonathan Akeroyd. A brief rally in the final quarter of 2024 petered out in the run-up to Donald Trump unveiling his tariffs in April this year.
However, the combination of a well-received turnaround plan and signs that sales are now stabilising has caused that momentum to return, leaving Burberry shares up 94% in 12 months.
Green shoots?
Of course, this good form can’t disguise the fact that many loyal investors are probably still in the red. But signs that realigning itself with its British heritage are working could push the shares up further.
There’s still some interest from short-sellers — those betting the stock will fall in value. However, this is far lower than it used to be. New CEO Joshua Schulman also picked up over £300,000 worth of Burberry stock back in June.
With inflation bouncing again, I’m inclined to wait until November’s half-year numbers before deciding whether to take a position here. Still, I’d be surprised if the lows of 2024 are revisited.
Pandemic casualty
Also rebounding over the last 12 months has been cruise ship operator Carnival (LSE: CCL). Unfortunately, I owned a stake in the company when Covid-19 struck. Sensing that the share price would be in for a tough time, I sold up and moved on.
Looking back, I’m glad I did. Carnival’s stock remains far below where it stood in early 2020. But it’s now moving in the right direction at least. We’re talking about a 94% gain in 12 months! And that’s despite a big sell-off in April, again in response to President Trump’s proposed tariffs.
Much of this is probably down to the company reporting strong bookings and higher on-board spending. Most recently, Q2 revenue came in higher than analysts were expecting. This pushed management to raise its guidance for the full year.
No return trip
The problem is that what attracted me to Carnival in the first place, namely the dividends, no longer exist. And there’s every reason to think they won’t be back anytime soon. Put simply, the pandemic pushed the company to take on an awful lot more debt to stay afloat. And reducing that debt has to be prioritised.
Looking ahead, there’s little doubt that cruising will remain popular, especially as many of today’s retirees — a key target demographic — seem far more active than previous generations. But the idea that Carnival will now sail back to previous highs without issue is probably asking for too much given the multiple risks faced by the travel industry in general.
I’m content to watch from the shore.
