Burberry PLC (LON:BRBY) has been out of fashion with investors so far this year, which is what has convinced Goldman Sachs to rethink its stance on the trench coat maker.
The heavyweight US investment bank had Burberry as a ‘sell’, but with the shares having failed to match the rises enjoyed by some of the fashion house’s peers of late, it has nudged its rating up to ‘neutral’.
READ: Burberry toasts 'excellent early reaction' to Tisci debut collection
“Over the past three months, Burberry has underperformed the luxury peers by c.10%,” analysts said in a note to clients.
“This we believe reflects a lack of consensus earnings upgrades, despite a strong luxury environment, which has led to a re-rating of stocks such as LVMH, Kering, Hermes and Moncler.”
They added: “Our forecasts remain below consensus as we expect Burberry will need to increase investments to drive an acceleration in brand momentum.
“However, market expectations now seem to have lowered, we now see a favourable currency tailwind providing support to earnings in FY20, and Burberry now trades at a discount to peers.”
Although they upgrade their recommendation, the analysts trimmed their price target to 1,800p (from 1,780p).
Looking ahead, Goldman said it would be paying close attention to the success of new ranges by creative director Riccardo Tisci, online sales and marketing and investment costs.
Burberry shares were up 4.1% to 1,863p.