Shares in Burberry Group PLC (LON:BRBY) have been on a decent run over the past few months and have risen 55% since the referendum, mainly driven by currency tailwinds.
But City broker Liberum says the iconic trench coat maker isn’t delivering the kind of returns it should be given the supportive trading environment.
“Burberry’s share price has been one of the biggest beneficiaries of sterling’s weakness but earnings per share (EPS) upgrades have lagged by a distance. Consensus EPS is up just 13% for 2017-2019,” said analyst Tom Gadsby.
He also thinks the current business model is inefficient, as evidenced by hit-and-miss trading around the world.
“Recent trading has been mixed with the UK well up, and China back to growth, but the US, France Italy, Japan and Hong Kong were down. In our view Burberry has too many stores and will see scant underlying growth.”
On top of that, Gadsby reckons the new chief executive, Marco Gobbetti, might find things arent quite so rosy when he takes over from Christopher Bailey in July.
“We believe that forecasts could come under threat when the new CEO takes over in summer. We would not be surprised to see expectations lowered following a strategic review.”
Liberum is forecasting a profit before tax of £63.7mln this year, on increased sales of £2.7bn.
Gadsby has the stock as a ‘sell, although he has upped his target price to £13.50 (from £12).
Shares were up 1% to £18.00 this morning.