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Bernstein upgraded Burberry; sees correct recovery course

Published 30/10/2024, 15:00
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Investing.com - Bernstein upgraded its investment stance on Burberry (LON:BRBY), saying the British luxury fashion house seems to be set on the right recovery course as it heads back to basics.

At 10:55 ET (14:55 GMT), Burberry stock rose 1% to £7.55, but this is still down over 46% year-to-date in the wake of its profit warning in July after first-quarter retail revenues fell 22%.

Bernstein sees the appointment of new CEO Josh Schulman as a net positive and a precursor of a more realistic approach to product and price, saying reviving Burberry should be easier and quicker, as it has a clear DNA to go back to. 

“Britishness, the trench coat, the check pattern shall become once again the cornerstone of a brand relaunch,” Bernstein said, in a note dated Oct. 30.

Burberry's plans on pricing are starting to make sense, the bank added, with a more realistic pricing architecture in leather should open significant opportunities.

“The price of handbags from the most reputed brands has gone up a lot post Covid. This creates a significant umbrella for Burberry to exploit. Burberry should go back to being a price follower in handbags - and can do so very comfortably today,” Bernstein added.

Burberry still has to go through at least six difficult months, the bank added, and the combination of difficult market conditions and the legacy of poor brand execution will cause operating losses in the short-term. 

“But the brand is worth much more than what it trades at today, and even a small sign of improvement will likely be rewarded by the market,” Bernstein added.

It upgraded Burberry to ‘outperform’ from ‘market perform’, with a price target of £9.30, from £6.80, offering 24% upside.

 

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