Broker view: Burberry revenues climb but the fashion house is still a ‘hold’

14th January 2016


As Burberry reports its third quarter results Ian Forrest, investment research analyst at The Share Centre, explains what they means for investors…

On Thursday fashion retailer Burberry reported third quarter revenues up 1% to £603m with comparable sales improving on the 4% decline seen in the second quarter.

In Asia, its key growth market, the company saw an improvement in trading in mainland China but investors should acknowledge that sales in Hong Kong remained weak, falling 20% with much lower footfall.

There was better news elsewhere with strong performances in Japan, Italy, Germany and Spain.

The company still expects full year profits to be broadly in line with market forecasts but warned that the outlook for demand in 2017 was uncertain while cost pressures persisted.

At present, we are maintaining our ‘hold’ recommendation on the stock, for investors willing to accept a higher level of risk.

There is a healthy level of demand from regions outside Asia, especially Europe and Japan where there is potential for further growth.

The improvement in conditions in mainland China is encouraging and the focus on productivity and efficiency should provide some benefits, but the continued fall in Hong Kong remains a concern.

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