Shares in Burberry (LON:BRBY) have fallen into the red as Goldman Sachs trimmed its rating on the company to ‘neutral,’ following the stock’s recent outperformance. The move came after the blue-chip retailer said yesterday that it was ending the practice of destroying unsold luxury goods.
As of 10:22 BST, Burberry’s share price had given up 0.76 percent to 2,078.00p as of 10:32 BST. The stock is underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.35 percent lower at 7,293.15 points.
Goldman Sachs trims rating on retailer
Goldman Sachs lowered its rating on Burberry from ‘buy’ to ‘neutral’ today, and took the stock off its ‘Conviction List’ following recent outperformance. The analysts left their price target on the shares unchanged at 2,536p.
WebFG News quoted the broker as explaining that the London-listed retailer had outperformed luxury peers by 21 percentage points over the past six months and given the recent weakness across the sector, it now saw more attractive relative upside elsewhere.
“We continue to see a strong equity story emerging for Burberry and our 2020 adjusted EBIT estimate remains 16% ahead of Bloomberg consensus but Burberry’s 28% re-rating year-to-date suggests investor expectations have risen,” Goldman pointed out, as quoted by the newswire.
Analysts flag 4% LFL sales growth in H2
Goldman Sachs further forecast four-percent like-for-like growth in the second half of 2019 compared to three percent in the first quarter.
“With new initiatives underway, this could prove to be conservative,” the broker pointed out. “In the event Burberry delivers a sharper acceleration in LFL sooner than we expect, it would leave upside risks to estimates; all else being equal, we forecast that a one-percent change in retail sales would drive a two-percent increase in EBIT.”