Burberry (LON:BRBY) and Unilever (LON:ULVR) shares could be boosted by the world economy’s reopening and recovery over the coming years.
The global Covid-19 vaccine programme is making encouraging progress, with 30% of the world’s population having had at least one dose. This is set to lead to an economic reopening that prompts GDP growth of 6% in 2021 and 4.4% in 2022, on a global basis, according to the IMF.
An improving economic outlook could catalyse demand for Burberry and Unilever’s products. As such, they may be able to outperform the FTSE 100 Index over the long run.
Burberry
Burberry’s financial performance and share price could be boosted by the continued reopening of its stores. By the end of June 2021, only 3% of its stores remained closed. This meant that its like-for-like sales in the first quarter of its financial year grew by 90% in comparison with the same period of the previous year. Indeed, they are now 1% higher than in the same period of 2019.
The firm is also benefiting from a shift in strategy that has sought to attract a younger demographic of consumers to its products. Changes such as an increasing digital focus, which has led to a 100% rise in online sales in comparison with 2019, and a greater emphasis placed on sustainability seem to be resonating with evolving consumer tastes. Meanwhile, fewer markdowns on products mean that margin growth could be upbeat over the medium term.
In fact, Burberry is forecast to deliver an annualised rise in earnings per share (EPS) of 13% between 2022 and 2024. This suggests that it offers fair value for money, with its forward price-earnings (P/E) ratio currently standing at 25.
Although risks such as the departure of its chief executive and the potential for new Covid-19 variants could hold back investor sentiment in the short run, the company appears to be well-placed to capitalise on a global economic recovery.
Unilever
Unilever’s share price could also produce strong returns that allow it to outperform the FTSE 100 Index over the long run. Its latest quarterly update showed that it delivered 5% underlying sales growth, which could remain at relatively high levels as the global economy recovers.
The firm’s ongoing investment in direct-to-consumer channels may improve its competitive position. Digital sales increased by 50% in the first half of the year and now account for 11% of turnover. Their growth may strengthen the firm’s relationship with customers and could help to offset a likely squeeze on margins prompted by rising inflation as the global economic recovery continues.
Unilever is forecast to post 10% EPS growth per annum between 2022 and 2024. Its forward P/E ratio of 22 suggests it offers relatively good value for money at a time when the sustainability credentials of its broad brand portfolio could become increasingly popular.
Meanwhile, its dividend yield of 3.5% and forecast dividend-per-share growth of 5% between 2022 and 2024 could add to its appeal during an era of low interest rates.