Burberry Analysts Laud Tisci as Stock Has Best Day in Decade

(Bloomberg) --

Burberry Group Plc shares surged the most in a decade after Riccardo Tisci’s designs boosted sales growth, alleviating concerns about mainland China sales slowing down.

Good demand from Chinese customers is positive for other luxury names, according to Morgan Stanley, while analysts at Goldman Sachs Group Inc. said strength in the U.S. was reassuring. Luxury peers including Richemont, Kering SA and LVMH rose in early European trading, outperforming the Stoxx 600 Index.

The bears weren’t fully convinced, however. BofAML expects difficulties outside of the Tisci collection, while several analysts noted the negative sales impact from reduced markdowns of older collections, as well as the current benefit from weaker sterling. Shares gained as much as 16%, the most intraday since January 2009, before paring the advance to 12% at 12:04 p.m. in London.

Here is what analysts had to say about Burberry’s results:

Morgan Stanley, Elena Mariani

• Increases price target to 2,000p from 1,850p, mainly to reflect company’s new guidance with currency boost; keeps rating at equal-weight
• The performance of the Tisci collection and the store refurbishment program underpinned the improvements to comparable sales
• Tone from the conference call was “confident and reassuring”
• Appetite from Chinese customers was very strong, representing a good read-across also for other luxury names
• Reiterated equalweight rating

Goldman Sachs, Louise Singlehurst

• Riccardo Tisci items outperformed previous collections

• Regional results to reassure investors, particularly the U.S., a source of concern throughout the luxury brands sector

• The reduced markdown in second half compared with period last year might reduce the like-for-like increase

• Rating neutral

Bank of America Merrill Lynch, Ashley Wallace

• Raises target price to 1,850p from 1,800p to reflect foreign exchange benefits, keeps underperform rating
• Says May roll-out of Monogram collection is likely to have disproportionately benefited first-quarter figures
• Though Tisci collection performed, expect difficulties elsewhere in business including first-quarter underperformance in accessories

Citi, Thomas Chauve

• Sales results outperformed expectations and confirmed return of consumer sentiment toward the brand
• It “remains to be seen” if the commercial success of brand identity can be sustained throughout the entire year and notes that the reduced markdown in the third quarter can affect comparable sales
• Rating neutral

MainFirst, John Guy

• The trading update outperformed expectations and should reassure the markets after sales increase in mainland China
• Expects the continuing rationalization program to increase profitability as the group removes nonperforming stores

• Rating outperform

RBC Capital Markets, Rogerio Fujimori

• Expects trading update to be “well received” by markets given the 4% increase to comparable store sales
• Without currency fluctuations the earnings outlook is unchanged, sees better returns for the risk elsewhere in the sector
• Retains underperform rating

--With assistance from William Canny and Albertina Torsoli.

To contact the reporter on this story: Timothy Abington in London at tabington@bloomberg.net

To contact the editors responsible for this story: Beth Mellor at bmellor@bloomberg.net, Kasper Viita

©2019 Bloomberg L.P.