This FTSE 100 stock is down 66% for the year! Is it now trade or avoidance?

Scan i FTSE 100 to find opportunities to buy, I was attracted Burberry (LSE: BRBY) shares.

It was easily one of the worst performers in the UK debut this year.

Let's take a look at what happened, and see if there isn't enough meat on the bones to heal.

Volatility hits hard

Burberry shares are down a whopping 66% in the 12-month period from 2,180p this time last year, to current levels of 737p. In 2024 alone, they are down 47% from 1,416p at the start of the year, to current levels.

It's not hard to identify the recent struggles of one of the world's most recognizable fashion brands. The global economic downturn has affected many sectors and firms, with luxury fashion and Burberry being affected.

Rising inflation, slowing growth in key markets, such as China, and reduced spending have also hurt business.

In its latest update, the Q1 report released on July 15, the business said retail sales fell 21% compared to the same period last year. This was after many profit warnings before this update. In fact, the company is on track to lose operations for the current half year.

Finding or continuing to reject?

I'm very optimistic, but even Burberry shares don't get my juices flowing. However, the truth is that its product potential, wide reach, and growth potential are exciting.

The last point can be the key to any recovery. With such a strong presence and past history of success in Asia, one of the richest regions in the world, there is a good chance that revenues will rebound in the long term. This is related to the growth of wealth in this area. However, past performance is no guarantee of the future.

From a valuation perspective, I have to admit that Burberry's current valuation is tempting, as the shares trade at a price-to-earnings ratio of just nine. In context, the historical average is above 22, so the shares are in the bargain zone.

What about a refund? However, when the price goes down, the dividend yield goes up. However, Burberry recently announced that it is suspending payments, at least for now. So there is one small thing I can add to the expert column as part of my investment case. However, since benefits are never guaranteed, this is not something I foresee coming off the back of a tumultuous spell.

My decision

I think once the volatility cools down, Burberry can get back on track, earnings can go up, and the share price can go up again. This happens when interest rate cuts happen, and China's economic problems ease.

There is still a long way to go, in my opinion. As a naive investor interested in long-term investments, I'd be lying if I said I was tempted.

However, I think my money is better invested in what I consider better options at the moment to help me build wealth. But I will certainly check for progress, and may revisit my post soon.