Burberry shares drop below issue price on first day of trading

Internal links

At the end of another grim week for investors, £93bn wiped off share values

Outlook

Shares in Burberry fell below their issue price on their first day of dealings yesterday, robbing the luxury goods group of the stylish stock market debut it had hoped for.

The shares were priced at 230p a share but closed down 5p at 225p after a heavy day of dealings. The price values the company at £1.1bn.

Burberry said it was "reasonably satisfied" with the outcome. Rose Marie Bravo, the £1m-a-year chief executive of the group, was said to be "pleased with the response from investors". Her 1 per cent stake in the business is worth £11m.

Burberry pushed ahead with its flotation in the teeth of a volatile market that has forced companies such as Yell, Focus Wickes and Prada, the Italian luxury goods company, to pull their flotation plans. GUS, the mail order group, retained a 77.7 per cent stake in Burberry, slightly bigger than previously anticipated.

The geographic split of the shares sold in the float was, 30 per cent to continental European institutions, 20 to 25 per cent to both the UK and US with 10 per cent to Japan.

Burberrys' debut was helped by a stable day on the London market. However, 58 million of the 112 million shares in circulation were traded as institutions tried to sell some shares immediately when they briefly edged up to 235p. "It is a disappointedly high volume," said Nick Bubb at SG Securities.

Burberry trades on about 16 time earnings, a large discount to its rival luxury goods brands such as Gucci and LVMH. However, some analysts said it should be compared with US fashion retailers such as Polo Ralph Lauren and Tommy Hilfiger, which trade on 13 and 10 times earnings respectively.

Private investors can buy Burberry shares from Thursday. Mr Bubb said they looked attractive. "There is more upside than downside," he said.

GUS shares fell 22.5p to 533.5p.