UBS has lowered its price target for Burberry Group PLC (LSE:BRBY), cutting it to 410p from 477p, while maintaining a "sell" rating on the luxury brand’s stock.
The revision follows concerns over Burberry’s ongoing strategy and a challenging outlook for the company’s recovery.
The fashion retailer is set to release its half-year results in mid-November, alongside a strategic update from its new CEO, Joshua Schulman.
UBS highlighted the risks it faces in sticking to its luxury positioning, which could prolong the recovery of its profits.
The Swiss bank forecasts a 24% year-on-year decline in comparable retail sales for the second quarter, with total first-half sales expected to fall 22% to £1.06 billion. An operating loss of £63 million is projected for the period.
The restructuring process and continued focus on positioning as a "true luxury" brand could lead to further earnings pressures, especially in a tough global market for high-end goods. UBS predicts Burberry will report losses for the financial year 2025, with weaker sales in key markets like China.
Valuation concerns have also prompted the investment bank's analysts to shift their approach, now using an enterprise value-to-sales (EV/Sales) ratio instead of price-to-earnings (P/E) multiples.
This reflects UBS’s expectation of losses over the next two years. Based on this, UBS adjusted its price target, indicating a 32% downside from the current share price.
In mid-afternoon trading, the stock was up 1.5% at 608p.