German finance house Berenberg is expecting high fashion firm Burberry Group PLC (LON:BRBY) to pull it out of the bag in its November trading update.
It will cover the July to September quarter, and as such will be the first reporting period under the direction of the company's new chief executive officer, Marco Gobbetti, who moved into the hot seat on 5 July.
Berenberg reckons Gobettii will unveil like-for-like year-on-year revenue growth of 3% in the second quarter of the fiscal year, despite the still difficult environment in some of its key markets.
The bank is predicting stable sales development on the wholesale side; allied with the ongoing transition in the licensing business, this leads Berenberg to forecast group revenue of £1.25bn, up 2% on an underlying basis.
Owing to roughly £12mln of foreign exchange related gains, it forecasts adjusted profit before tax will clock in at £174mln.
“The company has built its new strategy around increased productivity of retail stores with a focus on products to drive sales growth and a cost-savings plan of at least £100mln by FY 2019, which we expect to remain intact. Nevertheless, we believe that the new CEO is likely to address Burberry’s biggest problem, the US market, which on our estimates could imply near-term c10% downside to forecasts,” Berenberg said.
The German bank rates the shares a 'buy' and has a price target of 2,000p.
It sees Burberry as “one of the most exciting restructuring stories in the luxury goods sector”.
Due to its strong brand and low penetration in the leather goods category it sees more scope for revenue growth.
“The structural change in its cost structure implemented by the new CFO with at least £100m in annualised cost savings by FY 2019 provides an opportunity to address its historically low profitability versus peers. In addition, the increased willingness to return cash to shareholders and multiple management changes demonstrate the deep-rooted transformation the business in currently undergoing,” it concluded.
Shares in Burberry were off 0.6% at 1,880.1p.