1st Jul 2022 15:15
(Alliance News) - Burberry Group PLC will report a difficult first quarter, analysts at Barclays said on Friday, as the luxury goods company faces a tough macro outlook in the US and a Covid-19 hit from China.
Barclays expects Burberry's first quarter retail comparative sales to be down 2% annually, largely due to the virus hit from China.
The investment bank tips sales in China alone to be down 40%.
"[Europe, Middle East, India & Africa] is the only region expected to outperform, benefiting from the return of American and Middle Eastern tourists, as well as continued strength from locals. Meanwhile, the Americas is expected to only see low single-digit growth, due to strong comps but also due to some normalisation of demand," Barclays added.
A key focus will be on any commentary from China, the investment bank added. This is due to Burberry's "high exposure relative to peers".
"Investors will also be looking for reassurance around the US and resilience of demand in the country in light of a weakening macro outlook," Barclays added.
"We expect the next catalyst for Burberry to be in November with the release of H1 results, when [Jonathan] Akeroyd is set to provide a much awaited strategic update on the group."
China virus cases and global growth worries have presented a baptism of fire for new Burberry Chief Executive Akeroyd. Akeroyd was named as CEO in October and assumed the role on March 15, replacing Marco Gobbetti.
Burberry in May recorded an operating profit of GBP543 million for the financial year that ended April 2, up 4.2% from GBP521 million a year earlier.
Burberry's pretax profit rose 4.3% to GBP511 million from GBP490 million.
This was on revenue growth of 21% to GBP2.83 billion from GBP2.34 billion.
Looking ahead, Burberry maintained its guidance of high single-digit revenue growth.
However, it cautioned that its outlook is dependent on the future impact of Covid-19 and its rate of recovery in consumer spending in China.
Barclays rates the stock at 'equal weight' with a GBP20.70 price target. Burberry shares were 0.2% higher at 1,643.50 pence each in London on Friday afternoon.
By Eric Cunha; [email protected]
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