After a 68% crash in just one year, is this FTSE 100 stock now a deep profit?

Good taste is always in fashion. Whatever one thinks about the taste of a fashion house Burberry (LSE: BRBY), however, its shares have fallen sharply in fashion in the City. Last year, the FTSE 100 the company saw its share price drop by 68%.

In other words, I could buy three shares of Burberry for the price I would have paid for just one a year ago.

I just added the company to my portfolio, because I think it could be a serious bargain.

Why stocks are down 68%

To begin, however, I will talk about the main issue. After all, it's not unusual for an FTSE 100 share to lose 68% of its value in one year for no reason.

The problems in the business were already evident in last year's performance and did not start in the latest quarter. However, even a quick look at the quarterly update released this week shows some of the problems.

Retail revenue fell by more than a fifth compared to the same quarter last year. Comparable store sales were down at least 16% in all three of the company's trading regions, indicating that this is not a local problem. The budget was scrapped and the chief executive was fired. Wow.

Long-term energy

However, as a long-term investor, I am willing to hold shares for many years if I believe the investment case is worth it.

I am not underestimating the risk Burberry faces of weak luxury spending globally. That could get worse before it gets better.

However, I see that as a wider risk. I don't think Burberry is a turnaround story as a business that suffers from industry-wide problems.

It may be squeezed in the middle market, as a company with cheap products but equally not at the top table of the luxury world. Still, that's been true for decades – and the FTSE firm's product depth, British design heritage, and global distribution network have helped it do well. I see them as a continuing force.

The deepest possible value

I think that strength can be useful in the future. On that basis, the current Burberry share price may turn into real money in the long run.

Many directors bought shares this week using their own money. I take that as a vote of confidence for people close to the boardroom. But while that reassures me, directors can make bad investments just like anyone else.

What strikes me most here is that a proven business that has a lot going for it and has generated huge profits in the past has seen its shares marked up in such a dramatic way.

The company is navigating stormy waters and I expect that to continue. But I think the ship itself, although it may need a different approach, is strong. I think the FTSE 100 share has a worse future value than I expect it to have.