Barclays upgrades Burberry on valuation, strategy
Barclays upgraded luxury retailer Burberry to ‘overweight’ from ‘equalweight’ and upped the price target to 1,760p from 1,450p on strategy and valuation.
Burberry Group
710.00p
16:49 27/09/24
FTSE 100
8,320.76
16:59 27/09/24
FTSE 350
4,599.36
17:10 27/09/24
FTSE All-Share
4,555.44
17:04 27/09/24
Personal Goods
12,005.48
17:04 27/09/24
The bank said Burberry offers good value at 15% discount to the luxury sector, which it reckons is unjustified given the company’s well laid out strategy to drive store density in the medium term.
In the shorter term, Burberry should benefit from its cost-reduction programme, which it expects to save at least £100m.
“With the new CFO/COO arriving in January and new CEO by the summer, we believe the company will generate positive momentum in 2017. The group reports Q3 retail sales on 18 January – although we do not believe this is a catalyst given the medium to long-term benefits of the strategy.”
Barclays said that given the period of transition, the results will be less relevant than normal and the focus will be mostly on the group’s strategy. It expects an update on the cost initiatives where the company targets at least £100m of savings, and more importantly for the strategy, the success of the recent bag launches – bridle, patchwork and buckle bags – in line with Burberry’s strategy of growing accessories.
In addition, the bank said the share price now seems underpinned following various press reports suggesting US-based Coach was interested in buying the company at a 30% premium.
At 0936 GMT, the shares were up 0.7% to 1.544p.