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15 October 2015
Shares of Burberry (BRBY), whilst already in a strong 2015 downtrend, have taken another sharp leg lower as investors check-out following a weak H1 report that missed consensus. While first-half sales may have grown – retail gains offsetting wholesale/licensing weakness – it was only barley. And it appears market worries about a China/Asia slowdown are justified with the legendary Chinese consumer spending less on their much loved luxury goods at home, even if they continue to ring up the tills in Japan and Europe thanks to currency benefits. Even US demand is proving far from uniform.
Above-average China (and thus slowdown) exposure is hurting BRBY even more than rivals and while management points to FY guidance in-line with consensus, this is hardly a selling point with consensus having only recently been pulled down and FX translation continuing to bite. Note shares trading below even the most bearish broker target of 1300p, suggesting analyst models at both ends of the spectrum likely require come considerable updating.
Mike van Dulken, Head of Research
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