The FTSE 100-listed luxury retailer Burberry Group PLC (GB:BRBY) share price was hit yesterday after HSBC expressed its cautious outlook on the luxury goods sector. HSBC analyst Aurelie Husson-Dumoutier reduced her price target on the stock from 2200p to 1,750p while maintaining her Hold rating. HSBC issued a warning that the era of “exceptional growth” in the luxury sector, which was partially driven by revenge buying post-pandemic, is about to end after three years.
The broker stated that the brand repositioning for Burberry is in progress, with products from the new designer launched in September 2023. However, Dumoutier is concerned about the 20% higher prices of new collections during the overall deceleration in the luxury market. She also added that even if the long-term target is intact, the profit warning from the company for the full year is disappointing. The company anticipates that its annual adjusted operating profit will land at the “lower end” of the consensus range, spanning from £552 million to £668 million.
The Burberry Group is a global luxury brand with a rich British heritage. The company specializes in the design and sale of clothing, footwear, and accessories across various markets.
Falling Share Price: Cause for Concern or Investment Opportunity?
The shares fell by 3.2% yesterday, continuing the recent downward trajectory for the company. Recently, the stock went down by 10% after the company published its half-year earnings for FY23/24 on November 16. The reported operating profit experienced a 15% decline, falling to £223 million. The company attributed the overall slowdown to elevated inflation and the increasing cost of living pressures faced by its customers.
However, the long-term prospects for the brands make the current downfall a good investment opportunity for investors. The brand remains highly sought-after, especially in Asia. The ongoing growth of the middle class in this region will remain a driving force for the company’s top-line growth. In this context, the present slowdown is just a short-term headwind.
What is the Share Price Forecast for Burberry?
On TipRanks, BRBY stock has received a Hold rating, backed by a total of 14 recommendations from analysts. It includes two Buy, ten Hold, and two sell ratings. The Burberry share price target is 2,000.62p, which is 37% higher than the current trading level.
