Burberry Group (LSE: BRBY) shares just lately hit a 14-year low. They’re down 72% in 15 months! When FTSE 100 shares are distressed like this, it’s all the time value looking.

In spite of everything, Rolls-Royce inventory had plummeted greater than 80% previous to its turnaround, whereas Nvidia tumbled round 60% on the Nasdaq earlier than ChatGPT was launched.

So might Burberry shares now be in bargain-basement territory? Let’s have a look.

Worrying traits

On 15 July, the luxurious trend home reported a horrible first quarter for the 13 weeks to 29 June. Retail income plunged 22% yr on yr to £458m, with comparable retailer gross sales down 21%.

It mentioned the weak spot had continued into July and if it persists, it might even end in a H1 working loss.

Trying forward, it expects wholesale income to say no by round 30% for the total yr. In the meantime, the dividend was axed and a fourth CEO in a decade has are available.

An aesthetic fake pas

At present, the inventory’s buying and selling on a price-to-sales (P/S) ratio of 0.87. That appears too low at first look, even when annual gross sales are set to fall.

Alternatively, a few issues fear me right here. The primary is that Q1 gross sales fell in each single market (besides Japan) the place Burberry operates. So this isn’t only a China subject.

Second, Chairman Gerry Murphy mentioned on the Q1 convention name that the agency had “perhaps moved too far too fast with a new aesthetic”. That’s the model’s transfer additional upmarket with a brand new fashion below chief inventive officer Daniel Lee throughout a luxurious sector downturn hasn’t labored.

But he additionally mentioned there will probably be no main technique shift: “We’re trying to be a universal brand… we do need to reposition, I guess, back to our core, to some extent, but it’s an adjustment, not a reversal of strategy”.

In FY15, income was £2.52bn. In FY25, it’s forecast to be £2.61bn, down from £2.97bn final yr. That’s disappointing development for a worldwide luxurious trend model. I worry greater than an adjustment could also be wanted.

My transfer

Wall Road legend Peter Lynch mentioned: “Don’t buy ‘cheap’ stocks just because they’re cheap. Buy them because the fundamentals are improving.”

This is the reason I invested in Rolls-Royce shares at 149p regardless of them nonetheless being down lots. I believed the corporate’s fundamentals have been enhancing and this is able to in the end drive the share price increased.

In different circumstances, I’ll put money into an organization if the basics aren’t essentially enhancing however there’s substantial revenue on supply. For instance, British American Tobacco inventory’s grime low cost because the agency offers with falling cigarette volumes. However the sweetener is the large 9% dividend yield it carries.

In Burberry’s case, neither of this stuff apply. The corporate’s monetary outlook is weakening whereas there’s no dividend to cushion the blow. And whereas the brand new CEO might pep issues up, I discover the excessive government turnover a turnoff.

With its market-cap now at £2.77bn and heading for the FTSE 250, I feel Burberry might turn into an acquisition goal. Nonetheless, I don’t make investments hoping for takeover bids.

All issues thought-about, I’d fairly goal different FTSE 100 shares proper now.