Goldman Sachs upgrades Burberry to 'buy'

The bank, which upped its price target to 2,475p from 2,135p, noted that Burberry has underperformed luxury peers materially - down 36% over the last 12 months and 44% over the last three years - as the brand has been undergoing significant change to elevate its positioning towards a more premium offer, adversely impacting volume.

"With the recent announcement that the CEO is stepping, we believe Burberry is at the finishing stages of its reset," it said.

"We think expectations are low for Burberry - our revised base case of 7% underlying sales growth per annum FY22-26 is conservative versus guidance (of high single digits medium term, using FY20 as the base year) and sees 17% upside to our fundamental discounted cash flow valuation (ex M&A component)."

GS said that in the event Burberry achieves its target, this would imply a DCF-based valuation nearer to 3,000p per share.

"On our revised earnings, Burberry trades on 13x CY22E adjusted EV/EBIT - a circa 40% discount to peers which looks unmerited in our view."

At 1030 BST, the shares were up 3.4% at 2,054p.