HSBC cuts price on Burberry, retains 'buy' rating

HSBC has cut its target price on fashion label Burberry from 1,800p to 1,500p while retaining its ‘buy’ rating.

The investment bank noted a brutal shift in sales momentum, with the company being the fastest growing large soft luxury company up until September, where it was outperforming Gucci, Prada and Louis Vuitton.

However, the rate of growth in retail like-for-like sales growth dropped from 6% to -4% that quarter.

“Out of the 10 points delta, we estimate that the overall industry slowdown explains c3 points and unfavourable geographic mix (overexposure to weak regions such as Asia and HK, underexposure to strong regions such as Continental Europe and Japan) another c3 points.”

HSBC said it believe the rebound will be gradual with the Paris attacks, a promotional US market and warmer than usual weather.

With that in mind, the bank cut the company’s target price on the back of lower estimates.

“We have cut our FY March 16-18% EPS estimates by 2%, 10% and 12% respectively. We are 3%, 5% and 8% below consensus, respectively.”

Shares in Burberry were up marginally on the news, rising 5p (0.43%) to 1,162.00 at 0914 GMT.