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Seven directors of Burberry (BRBY, 229p) bought shares in November after the group warned of ‘tough conditions going into Christmas’.

Results today show like for like sales down only 3%, and an expansion of the cost cutting plan by an additional GBP 30-35m (Burberry Third Quarter trading statement here).

The shares have bounced sharply in relief today that trading over Christmas wasn’t as bad as the market had been anticipating.

So who did you listen to, the scary ‘tough conditions statement’ or the directors ?

Did you pay attention to the words or the actions?

Burberry shares are now up more than 35% since our comment on November 24th (STRONG signal, Positive view, see ‘Burberry Check’), and have outperformed the FTSE 250 index by over 20%.

Take profits.

See also note of January 20th : ‘Burberry Delights’.

burberry-checkLast week Burberry (BRBY, 170p) warned ‘of tough conditions going into Christmas’ (Telegraph 18 November).The shares fell 12%, and then management started buying.

A mixed message you think?

Angela Ahrendts, Burberrys CEO, says ‘We’ve seen it all’. She refers to having a very seasoned management team, and plenty of experience of tough times: SARS, 9/11, Asian crisis.

Ahrendts herself has plenty of experience, having held senior positions at Donna Karan, Henri Bendel and Liz Claiborne before landing as CEO at Burberrys in October 2005, taking the place of Rose Marie Bravo who resurrected the brand.

Do Ahrendts team believe they can battle it out?

It seems so. John Peace (Chairman), Joy Frommer (PDMR) and Pascal Perrier (President Asia Pacific) have all joined Angela Ahrendts in buying shares on November 20th and 21st, investing almost GBP 400,000 between them, at prices between 172p and 174p, and increasing their holdings by an average of 40%.

They were joined by three of the four non execs, Bowman, Tyler and Carter, who invested about GBP 74,000 between them, increasing their positions by an average of 80 odd %, and paying between 176p and 184p on November 19th.

The only exec board member who didn’t buy shares was CFO Stacy Cartwright, who may still be suffering shellshock from having paid just shy of 500p five months ago. Ahrendts paid the same price for 135,000 shares.

In hindsight, the best sales of stock were made by Rose Marie Bravo, as she managed her exit from the group, selling 4 million shares at 421p and 446p between July 2005 and July 2006.

The worst purchases were made by Ahrendts and Cartwright in June 2007, when they paid within 3% of the all time high, buying 82,000 and 37,000 shares respectively at 701p. Cartwright wisely cut her losses, selling at 659p within two months.

I feel happier with these purchases than I did when Ahrendts paid 496p in June, because they are supported by other board members, both executive and non executive directors, as well as two senior managers of the group.

View on Burberry: Positive- directors buying shares

Strength of Signal: STRONG- Five directors of seven buying shares. Increase in shareholding averages above 40%.

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