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(Sharecast News) - RBC Capital Markets cut its price target on Burberry on Friday to 1,700p from 1,900p after the luxury fashion brand's sales warning a day earlier.
The bank, which rates the shares at 'sector perform', said that following 1H24 results and the guidance cut, it has lowered its FY24 revenue/ EBIT estimates by 4%/12% and FY25E by 7%/15%.
"The magnitude of top line deceleration in 2Q versus 1Q is material, largely due to a Chinese cluster we believe," it said.
"With exit rates in Oct/Nov likely still pressured, we believe 3Q is unlikely to deliver a significant or sustainable rebound in momentum."
RBC said it likes what Burberry is doing with product and range architecture. However, the timing is not ideal given softening luxury demand trends and RBC sees gross margin risk in 2H24E.
It prefers 'outperform' rated Gucci owner Kering for "valuation/turnaround idea".
At 1000 GMT, Burberry shares were up 1.2% at 1,568.20p, having tumbled on Thursday.
