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Burberry share price: RBC says retailer no longer worth shorting

RBC Capital Markets has removed Burberry (LON:BRBY) from its list of large-cap stocks it would sell short, Proactive Investors reports. The new comes after the luxury goods retailer’s shares suffered a hefty fall last week as Morgan Stanley trimmed its stance on the European luxury goods sector, arguing that Chinese consumer confidence – traditionally a good indicator for the sector – appeared to have peaked.

Burberry’s share price has fallen into the red in today’s session, having given up 1.14 percent to 1,741.50p as of 14:41 BST. The stock is underperforming the broader UK market, with the benchmark FTSE 100 index which has climbed marginally into positive territory and is currently 0.23 percent higher at 7,012.06 points. The group’s shares have lost about 7.6 percent of their value over the past year, largely in line with a fall in the Footsie.

RBC weighs in on Burberry

RBC, which rates Burberry as an ‘underweight’ with a price target of 1,875p, has removed the group from its list of large-cap stocks it would sell short, with the luxury goods retailer having fallen 21 percent since the end of August.

“On a relative basis, we stick to our Underperform rating on Burberry Group given that the brand is more exposed to slowing demand in China (above average exposure to Chinese cluster at 40 percent of global sales) and the risks of repositioning the brand into luxury fashion against a highly competitive backdrop that should require a step-up in reinvestment,” the analysts pointed out, as quoted by Proactive Investors.

Below-sector average growth

RBC further continues to see Burberry as offering below-sector average growth in the medium term with above-average execution risks at a premium valuation versus its peers.

The luxury goods retailer is scheduled to update investors on its interim performance on November 8.

As of 13:50 BST, Monday, 15 October, Burberry Group plc share price is 1,744.00p.

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