On Monday, Barclays adjusted its outlook on Burberry Group (OTC:BURBY) PLC (BRBY:LN) (OTC: BBRYF), reducing the price target to GBP 10.00 from the previous GBP 10.90, while sustaining an Equalweight rating on the stock. The revision comes ahead of Burberry's first-quarter trading update scheduled for July 19. The firm anticipates the luxury fashion company to report a 15% decrease in retail comparable sales.
The analyst from Barclays highlighted the high fixed operating expenses at Burberry, which account for 80% of the company's operational costs. Due to this cost structure, significant operating deleverage is expected in the first half of the fiscal year. Consequently, the estimated earnings before interest and taxes (EBIT) for the first half are projected to fall to £47 million.
The earnings per share (EPS) forecast for the fiscal year 2025 has also been revised downward by 24%. The lowered earnings outlook is a reflection of the anticipated decrease in retail performance and the resulting financial impact on the company's profitability.
Burberry's upcoming trading update is likely to provide further insights into the company's performance and may influence market perceptions. The current Equalweight rating implies that Barclays views Burberry's stock as fairly valued at the current level, considering the expected financial outcomes.
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