Burberry share price drops amid fears of Chinese consumption slowdown

Morgan Stanley suggests country’s demand for luxury goods may have peaked

Burberry share price drops amid fears of Chinese consumption slowdown

Shares in Burberry (LON:BRBY) have posted a hefty fall in today’s session, alongside other luxury goods stocks, amid fears of a slowdown in China as Morgan Stanley downgraded its stance on the European luxury goods sector. Today’s decline comes after Credit Suisse recently lowered its rating on the FTSE 100 group, arguing that the company is ‘lacking near-term catalysts’.

As of 14:14 BST, Burberry’s share price had given up 5.93 percent to 1,768.50p, significantly underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.43 percent lower at 7,206.60 points. The luxury goods retailer’s shares have lost a little over four percent of their value over the past year, largely in line with a 4.2-percent dip in the Footsie.

Burberry under pressure

Shares in Burberry have come under pressure as Morgan Stanley trimmed its stance on the European luxury goods sector. WebFG News quoted the analysts as saying that  Chinese consumer confidence – traditionally a good indicator for the sector – appears to have peaked.

“The weakness in Chinese consumer confidence has weighed on the sector of late, and is likely to remain a drag going forward if Chinese consumption trends continue to slow,” the broker explained, as quoted by the newswire, adding that the sector was also vulnerable to a general underperformance of growth versus value. The analysts have further pointed to  slowing earnings per share momentum, with EPS revisions ‘having rolled over in recent weeks’.

Analyst ratings update

Jefferies reaffirmed Burberry as a ‘hold’ last week, while hiking its price target on the shares from 1,650p to 2,060p. According to MarketBeat, the blue-chip group currently has a consensus ‘hold’ rating and an average price target of 2,021.44p.

As of 14:55 BST, Wednesday, 10 October, Burberry Group plc share price is 1,730.00p.

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