City analysts warn that Burberry faces a takeover after it lost a fifth of its worth since the beginning of the year.
A profit warning by Burberry’s Paris-listed competitor Kering which owns Gucci triggered a fall in the shares of the British fashion brand on Wednesday. Burberry’s shares fell by 2.5pc, meaning that the company has lost 20pc since the beginning of the year. The business is now worth £4bn.
Sasha Kachanova, Abrdn’s investment manager, said that Burberry is a target for a takeover. This is especially true at its current value.
Bloomberg conducted a survey last year of 17 City M&A Desks, Fund Managers and Analysts. Burberry, Germany’s Hugo Boss, and Swiss luxury group Richemont were among the companies that were floated as possible takeover targets.
Ms Kachanova stated that Burberry was the only British brand operating independently, a rare thing in the luxury sector. It boasted a rich history and had the chance to enhance its iconic products and accessories.
Abrdn, one of Burberry’s top 20 shareholders, is owned by Ms Kachanova.
The City is experiencing a flurry of deals. Even the largest businesses are now targets due to low valuations. Adnoc, an oil company from the UAE , recently explored a bid for BP.
Burberry is one of the worst performers in the FTSE 100 this year, as the demand for luxury goods has slowed, especially in China.
It is unusual for the industry to operate as a separate brand, rather than part of a bigger group. Burberry competes with LVMH which is worth £400bn and owns Louis Vuitton and Stella McCartney.
In the US, Tapestry, owner of Coach and Kate Spade handbags, is currently pursuing an $8.5bn deal (£6.8bn), to purchase Capri Holdings – the parent company of Jimmy Choo and Michael Kors.
This week, the Federal Trade Commission sued to block this deal on grounds of competition.
Kering shares, which include Gucci and Balenciaga brands, fell 6.8pc after the company warned that operating income could fall up to 45pc during the first half year.
The first quarter sales slumped by 11pc, mainly due to weakness in China.
Prada, the Italian luxury brand that also owns Miu Miu reported a 18pc increase in retail sales in its first quarter, largely due to a strong performance by Prada in Asia.
Burberry has not responded to any requests for comment.