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Burberry and Pearson falls hit FTSE and Train

Burberry and Pearson falls hit FTSE and Train
 

Update: Burberry and Pearson have fallen to the bottom of the FTSE 100, dealing a blow to Citywire AA-rated fund manager Nick Train, a big backer of both stocks.

Burberry (BRBY) fell 7.7% to £16.48 after the luxury brand reported a 2% fall in retail revenue over the Christmas quarter.

It was joined at the bottom of the FTSE 100 by Pearson (PSON), down 6.4% at 672.2p as the educational publisher continues to feel the pressure in its North American business.

That weighed on the FTSE 100, which fell 15 points, or 0.2%, to 7,740.

Burberry is a top 10 holding in Train's Finsbury Growth & Income (FGT) investment trust and LF Lindsell Train UK Equity fund.

Pearson's slump from a peak of nearly £15 in early 2015 has meanwhile seen the stock fall out of the top 10 in Train's funds, but his Lindsell Train fund group remains one of the stock's biggest investors with 5.2% of the shares, according to Reuters.

Burberry's sales fall was sparked by the UK, which suffered compared to the Christmas period the year before, when the pound's fall following the Brexit vote had helped to boost sales from tourists.

Steve Clayton, who holds Burberry in his HL Select UK Shares fund, said that while the third quarter figures were 'drab', the investment case for Burberry was focused on new boss Marco Gobbetti's plan to drag the brand further upmarket.

'Progress on this front is said to be strong, but with returns unlikely to be visible in the profit and loss account for some time, investors have to take Gobbetti on trust,' he said.

Pearson's fall came as the embattled educational publisher reported a 3% fall in sales of US higher education course materials.

Roddy Davidson, analyst at Shore Capital, retained his 'hold' rating on the shares on the news.

'We remain wary on trading conditions in the North American higher education space (which has experienced several "false dawns") and on execution risk as the company continues to negotiate the substantial organisational and cultural change required to align itself to a digital future,' he said.

Informa (INF) was another heavy faller, down 7.2% at 693.4p after the trade show organiser announced it was in talks to buy rival UBM (UBM). UBM jumped to the top of the FTSE 250 on the news, up 11.4% at 876p.

At the top of the FTSE 100 sat Rolls-Royce (RR), up 6.4% at 907.8p after announcing it was considering the sale of its commercial marine business as part of a restructure of the aircraft engine maker.

On the FTSE 250, Provident Financial (PFG) slumped 14.8% to 684.2p as analysts at Liberum warned the risks of investing in the embattled lender were 'still too great' following yesterday's trading update.

Among 'small-cap' stocks, Interserve (IRV) was down 1.7% at 119p, having recovered the bulk of the morning's heavy losses, as the government downplayed fears over the outsourcing group's financial health following Carillion's collapse.

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Steve Clayton
Steve Clayton
160/185 in Equity - UK (All Companies) (Performance over 1 year) Average Total Return: 2.85%
Nick Train
Nick Train
8/151 in Equity - UK (All Companies) (Performance over 3 years) Average Total Return: 38.68%
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