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Market report: Burberry fall softened by activist investor upping stake

Tom Rees
Alfred Frère upped his stake in Burberry from 4pc to 6pc - AFP

Burberry’s strategy shift-induced freefall on the FTSE 100 came to a sudden halt after revered Belgian activist investor Alfred Frère seized the opportunity to snap up the fashion house’s shares on the cheap following its two-day plunge.

Mr Frère jumped at the opportunity to up his stake from 4pc to 6pc in the designer after spooked investors sent its shares spiralling on a new upmarket strategy to “sharpen” the brand and boost margins.

Mr Frère is renowned for cranking up the pressure on boards to improve results and bumped up his stake in firm through his investment vehicle GBL Energy Sàrl.

The billionaire has helped turn around German sportswear giant Adidas in recent years and the stake increase, which has been built in conjunction with the Desmarais Family Residuary Trust, makes Mr Frère the third largest shareholder in Burberry.

After rallying to a record high of £19.85 on Wednesday, new chief executive Marco Gobbetti made Burberry shares out of vogue in one fell swoop the next day.

Analysts extended the trench coat maker’s shares plunge into a second day with a slew of downgrades and slashed target prices. UBS analyst Helen Brand told clients in her downgrade to “neutral” that the costs and time to do the restructuring, which will see stores in less luxurious locations close and other sites spruced up, are more than expected.

Burberry swung wildly on the stock market yesterday, plunging 4.6pc in early trade before spiking to a 1pc gain as news broke of Mr Frère’s stake. Bearish sentiment took hold again and it finally settled at a 41p, or 2.3pc, loss at £17.46.

Elsewhere, Bunzl is highly vulnerable to Amazon’s foray into the B2B market, Morgan Stanley warned to send the blue-chip distribution giant sliding to the bottom of the FTSE 100.

Bunzl is more at risk from the online giant flexing its muscles in the sector than French peer Rexel and the two firms could still be wounded in a scrap for market share even if Amazon fails. Some Bunzl shareholders didn’t have the stomach for the fight and the firm dipped 151p to £21.57.

After coming out of Thursday’s global retreat on stock markets largely unscathed, the FTSE 100 suffered worst in Europe yesterday, pulling back 51.11 points to 7,432.99, as the weakness in equities extended into a second day.

“Internet of things” provider Telit Communications soared as high as 11pc on City chatter that its Chinese top shareholder is looking to double its current 14pc stake by snapping up shares from institutional investors ahead of a takeover bid. With private equity firms said to also be also sniffing around the Tesla supplier, investors piled into the Aim-listed stock lifting it 12.5p to 187p.

Defence and technology group Ultra Electronics nosedived 190p, or 11pc, to £15.27 after revealing that a decision from the US Department of Justice regarding its acquisition of Sparton has been delayed until the end of March.

The FTSE 250 firm had expected a verdict from the DoJ by the end of this month and the hold-up for completion of the $234m acquisition for the US navy supplier could be extended further, according to Liberum.