Burberry Group PLC (LSE:BRBY) is set for a revenue slump with its first quarter update next month says City analysts as new designs and less spending by its aspirational customer base take a toll.
Deutsche Bank has just reduced its sales forecast to minus 17% (from minus 12%) on weaker data from China and the US.
That will translate into lower gross margins, adds the bank, with a first-half reduction of 250bp (2.5%) expected and underlying profits [adj EBIT] to slump to £31 million from £223 million last year.
For the full year, the bank's profit forecast is cut by 11% to an underlying £287 million (from £320 million) and in 2026 "creeping under the £400m EBIT mark".
“While we like the potential for a Burberry turnaround, we would need to see the evidence from when the new ranges hit the stores in September to take a more constructive view, “ it said.
Deutsche Bank’s target price is also cut to 1030p (from 1140p) with a 'hold' recommendation.
UBS meanwhile is a seller with a target price of 720p. For the first quarter, it is forecasting a sales decline of 14%, slightly better than consensus.
Shares were down 5% at 914p.
First quarter numbers are expected on 19 July.