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Meanwhile, Seymour Pierce has cut its rating from 'buy' to 'hold' in spite of its long-term view of Burberry as a growth story with significant geographical and product mix opportunities. "This news will obviously hit sentiment towards Burberry and the luxury sector and the shares are likely to underperform until there is better news on demand."
Both Nomura and Seymour Pierce downgraded their ratings for British luxury brand Burberry on Tuesday morning after the company warned about a sales slowdown in the second quarter. Nomura lowered its recommendation from 'buy' to 'hold' and reduced its target price from 1,450p to 1,210p, saying: "Delivery on margin growth, merchandising initiatives and continued prospects for double-digit space at high returns are the reasons to own the shares long term, in our view. However, with very limited near-term visibility, we lower our rating."
Discussions with Interparfums SA ended Following the announcement of 17 July 2012, discussions with Interparfums SA have ended. Burberry continues to pursue various strategic options to develop fully its fragrance and beauty business in the future.
http://www.investegate.co.uk/Article.aspx?id=201207270700046213I
Stacey Cartwright, the Executive Vice President and Chief Financial Officer of high-end fashion label Burberry, has sold 122,500 of the 132,500 shares she received shares which vested on Thursday. Cartwright, who joined the firm as CFO in 2004, sold the shares at 1,211.99p each, earning her a total of £1.36m. Under the firm's Co-Investment plan, Cartwright and Chief Executive Officer Angela Ahrendts have both deferred their bonus for the year ended March 31st and have instead invested in shares at 1,211.99p a pop.
Discussions with Interparfums SA Since December 2011, Burberry and Interparfums SA, the prestige fragrance company and exclusive worldwide licensee for Burberry fragrance and beauty products, have been engaged in discussions regarding the potential establishment of a new operating model for the Burberry fragrance and beauty business. While these discussions continue, their outcome is uncertain. To maintain flexibility in pursuing its objective to develop fully this business in the future, Burberry has served notice of its intention to terminate the licence agreement with effect from 31 December 2012. Upon termination at 31 December 2012, Burberry would pay InterParfums approximately €181 million in cash. Further information will be provided in due course.
http://www.investegate.co.uk/Article.aspx?id=201207170700017852H
The Questor team in The Telegraph has recommended to hold luxury brand group Burberry, after the firm's latest slowdown in sales growth hit the shares hard yesterday. The paper says that to justify its rating - shares are trading at 16.9 times current-year earnings - Burberry must continue to grow which will be a challenge with strong prior-year comparisons. The column says that China is key to this growth and the amount of new floor space there should keep sales rising for some time. "Questor thinks the shares, which yield 2.4%, are still a hold and not a buy, because of near-term headwinds, though the evolving business model bodes well for continued long-term growth."
Positive Points: Operationally, investment in flagship markets continues with six large stores opened in the three months period including a fourth store in Brazil and an outlet in Hong Kong. Burberry plans to open further stores later this year in London, Milan, Chicago, Hong Kong and Shanghai. The company said it continued to see strong sales growth in Asia and in particular China. The retailer reported its men's tailoring and non-apparel "performed strongly" alongside new merchandising in soft accessories. Retail sales account for approximately 70% of the Burberry business, with wholesale and licensing making up the remainder. Discussions continue between Burberry and Interparfums regarding the potential establishment of a new operating model for the Burberry fragrance and beauty business. A progressive dividend policy continues to be pursued.
Negative Points: While revenue for the quarter was 11% higher than the same period a year earlier, Burberry missed analyst expectations with the European debt crisis and slowing growth in some emerging markets leading concerns. Burberry's results are exposed to changes in demand for luxury goods, which in turn is reliant on the health of the external economic environment, the stock market and local consumer confidence. Large proportions of Burberry's sales are related to tourism and are therefore exposed to changes in international tourist flows. Burberry has a much higher exposure to apparel and therefore is exposed to fashion and inventory risk.
Financial Highlights: Retail sales, which make up the majority of the group's revenues grew to £280 million, up from £245 million, helped by a strong performance in its menswear range. Wholesale revenue rose 9% to £102 million, in line with company expectations. Licensing revenue fell 5% to £26 million, impacted by the phasing of licence terminations. Full year is expected to be broadly unchanged, added the group. Overall, total revenues rose to £408 million in the quarter from £367 million in the same period the year earlier. Analysts had expected sales of £416 million.
First quarter trading update: In a strange parallel to the Chinese economy, where the slightest slowdown in growth filters through to a drag on investor sentiment, Burberry is being taken in isolation. If set against yesterday's update from M&S, for example, the numbers are in a different league, as are the prospects. However, the shares' valuation is quite full and the weight of expectation is heavy. Added to this, the previous announcement of further investment in the company being likely to crimp margins in the medium term, along with concerns over the potential perils of luxury discretionary spending (let alone within the backdrop of fashion, where fads can change overnight) are bearing down on the shares. At the moment, from an investment perspective, it is difficult to pigeonhole the stock as either income (2% dividend yield) or growth (share price down 16% over the last three months, as compared to a 0.5% gain for the wider FTSE100). Even so, the company arguably remains the best house in a bad neighbourhood. Its exposure to Asia is supported by any economic upturn in the US or indeed Europe, and the 12% share price dip over the last year could prompt potential investors into having another look
Burberry Group PLC is a British luxury fashion house, manufacturing clothing and fashion accessories. Its distinctive tartan pattern has become one of its most widely copied trademarks. The company has branded stores and franchises around the world and also sells through concessions in third-party stores. It runs a catalogue business and has a fragrance line. HM Queen Elizabeth II and HRH, the Prince of Wales have granted the company Royal Warrants. Burberry's trademark products are its fashionable handbags and exclusive fragrances. Burberry is quoted on the London Stock Exchange and is a constituent of the FTSE 100 Index.
Nomura has reduced its target price for luxury brand Burberry after a slower first quarter, though the broker maintained its 'buy' recommendation for the stock. Given the recent pull back in the sector and its reduced estimates, the broker has lowered its price target from 1,530p to 1,450p. Investec also reiterated its 'buy' rating on the stock this morning, saying: "We would highlight that Q1 is the smallest quarter for Burberry and is against the toughest comp this year." The broker said it would review its forecasts for the group after a conference call with the firm but is "happy to remain a buyer".
Fashion brand Burberry is expected to update the market, and the group does not often put a foot wrong, so expectations are that the firm is riding out the global economic slow-down well.
Seymour Pierce retained its "buy" stance on Burberry (BRBY), with a target price of 1,700p, ahead of the group's first quarter results release on 11th July. The broker attributed the shares' recent underperformance to concerns over luxury spending declines, but noted that this has not materialised. Seymour Pierce forecasts like-for-like sales growth of 9% and pointed to the group's strong balance sheet, with net cash of 338 million pounds at the end of the 2012 financial year
Luxury goods giant Burberry (BRBY) provides a trading update on Wednesday following a stellar growth run and a 26% hike in annual profits announced in the finals in May. The challenge Burberry faces is to maintain this impressive rate of growth, and given that the main driver is the burgeoning China economy, the raft of economic data due from the nation this week will probably have the greatest impact on the price movement at the time of the announcement. Broker Nomura remains a fan though, reiterating its buy rating and 1,530p price target at the start of July
Credit Suisse expects a slowdown in organic sales growth in the European luxury goods sector but says it favours British firm Burberry for its brand momentum and self-help growth potential, reiterating its 'outperform' rating and 1,650p target price on the stock. The broker said that "Burberry looks better equipped than ever to navigate through an uncertain environment with more retail and more balanced geographic mix, it has fewer legacy issues to deal with than in the past and should soon reap the full benefits of the gradual implementation of SAP."
Burberry is a major turn off for Questor in the Telegraph. The firm has done extremely well in the recession, buoyed by demand from China, but even after recent falls it trades at an eye-watering 27.7 times earnings. This is too much in the fickle world of fashion says Questor. Avoid.
summary True, Burberry's product design wins all the plaudits, and management has made operational improvements that have helped it grow profits. But it is nevertheless hard to believe that the group wouldn't be affected if the global economy deteriorated further in the coming years. That seems possible given that both Europe and China have their own set of problems and the US recovery, built on the foundations of tax cuts and government spending, looks fragile. Alongside an increasingly bearish chartist setup, But as always do your own research...........
Burberry's premium rating also leaves its share price precariously poised when nervousness rules. Although Burberry's forecast PE ratio of 20 is not astronomical in the context of the global luxury goods sector, it is high enough to make the share price vulnerable if Burberry does not consistently beat forecasts. And it isn't doing this - underlying growth rates are being flattered by opening new selling space. Although retail revenue climbed 31 per cent last year, like-for-like sales grew a more modest 14 per cent, while the benefit from transferring lower-value wholesale revenue to higher-value retail will hit a wall at some point.
While Burberry has a powerful brand, its share price seems to be hostage to external fortunes. Bouts of price weakness have coincided with fears about the eurozone, or poor economic data from China. Burberry now owns 63 stores in the middle kingdom after acquiring its partner there last year, making it the group's largest single territory, accounting for around 12 per cent of revenues; by comparison, the Americas account for just 8 per cent.
Since then, though, the price has failed to make progress. Technical analysts point to a resistance level around 1,600p that the share price once again failed to breach earlier this year, setting up - as chartists call it - a double top. In a bull market, the theory goes, that's not a problem. But Burberry's strong up-trend ended a year ago, since when it has marked time. Even last week's decent results prompted a sharp drop after a cautious outlook from chief executive Angela Ahrendts. Importantly, that initially took the price below its 200-day moving average, another technical sell signal.
That level of growth has become par for Burberry's course - in five years its revenues have doubled, despite an expensive withdrawal from Spain in 2010. As it turns out, those problems were more than offset by the increasing popularity of the brand in fast-growing markets such as China and Brazil, where the newly affluent are keen to flaunt their spending power. That translated into an eightfold increase in the share price between the 2008 lows of the credit crunch and last summer when the shares peaked around 1,600p.
You might not think the UK economy was in a slump if you visited the country's upmarket shopping spots. Well-heeled Bond Street shoppers continue to snaffle shoes and handbags - good news for luxury goods retailer Burberry. It grew sales by 24 per cent last year, and plans to add 14 per cent more space this year in key global cities.