Liberum ups Jimmy Choo to 'buy' after trading update

Liberum upgraded Jimmy Choo to ‘buy’ from ‘hold’ with an unchanged target price of 135p after the company’s trading update.

It said the update suggests Choo is showing resilience in a difficult market.

Shares in the luxury goods maker shot higher on Wednesday after it said it had made a good start to the year, with trading in line with expectations despite the headwinds facing the sector.

Liberum said the update was timely as the stock has been hit by wider concerns about the luxury market, with peers such as Burberry, Ralph Lauren and Hugo Boss also taking a hit.

“LFL sales amongst the peers have been down mid-single digit in recent reporting. It is therefore welcome that management has provided comfort that the company is on track to meet full year forecasts,” the brokerage said.

“The shares have been driven lower, we believe, by a combination of concerns over the wider luxury goods market malaise and fears over a possible Brexit which has impacted most of the UK market. In our view the Q1 statement should be sufficient to show that a strong brand with a flexible business model can continue to thrive.”

Liberum made no call on Brexit but pointed out that Jimmy Choo has a natural hedge against any weakening in the pound: although it buys almost all of its stock in euros, it also makes over two thirds of its sales outside the UK so stands to benefit from translating dollar and euro profits back into sterling.

In addition, the brokerage argued the stock is oversold, down 30% year-to-date and 20% in the past few weeks.

At 0855 BST, shares were up 15% to 110.40p.