On Thursday, UBS adjusted its outlook on Burberry Group (OTC:BURBY) PLC (BRBY:LN) (OTC: BBRYF), reducing the luxury fashion brand's stock price target to GBP7.20 from GBP7.50. The firm sustained its Sell rating on the company's stock.
The revision comes ahead of Burberry's fiscal first-quarter results, anticipated to be disclosed on July 19, which UBS predicts will reflect ongoing challenges within the luxury sector and Burberry's position relative to its competitors.
The forecast by UBS anticipates a continued double-digit decline in sales, with like-for-like (LFL) sales expected to drop by 14% as compared to a 12% decrease in the fourth quarter of FY24. The analysis suggests that Burberry's efforts to elevate its brand have not been successful, leading to discussions about potential future directions for the company after an unsuccessful second attempt at a turnaround.
UBS has opted to maintain its existing estimates for Burberry, with the only significant alteration being an update on the foreign exchange (FX) impact. This update is projected to result in a 3% decrease in earnings per share (EPS) for the fiscal years 2025 to 2027.
The firm expresses continued concern over the long-term (LT) uncertainty of Burberry's recovery trajectory, noting that the company has not yet adjusted its short-term (ST) ambitious margin targets despite the challenges faced.
The analyst from UBS highlighted the lack of signs of a turnaround for Burberry, with the upcoming quarterly report likely to shed light on the broader trends affecting the luxury goods sector and Burberry's performance in comparison to its peers. The company's current strategy and future direction remain key topics of debate among investors and analysts alike.
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