Deutsche Bank has downgraded its Burberry Group PLC (LSE:BRBY) share price target in another sign of heightened uncertainty in the global luxury sector.
It follows a dramatic trading session on Monday that saw the British fashion institution’s valuation plummet more than 16% after parting ways with chief executive Jonathan Akeroyd.
Burberry also suspended its dividend, stating that it expects to report a loss for the first half of the financial year.
It was a “sensible strategic choice” for Burberry to replace Akeroyd while retaining its creative designer Daniel Lee, said Deutsche analysts.
They added: “The early stylistic changes are being pared back, more accessible price points are being introduced and the focus is being returned to the areas such as trenchcoats and scarves where Burberry has brand authority.”
However, it is not yet enough to motivate Deutsche’s share price rating away from hold. The bank's 12-month price target has also been reduced from 1,030 to 800p.
Burberry, like many other luxury and discretionary brands, is suffering from a decline in sales in the important China market.
European luxury large caps including LVMH, Cartier and Richemont are also feeling the pinch from reduced Chinese spending.
Deutsche analysts see some optimism for Burberry on the horizon though: “Investors were becoming increasingly frustrated with the performance at Burberry and looking for a change in strategic direction.
“We expect that this will start as a gentle turn but will evolve into a larger shift over time."
Burberry shares fell another 2.8% to 723p on Tuesday.