Burberry Group PLC (LSE:BRBY)’s interims, at which former Versace boss Jonathan Akeroyd set out his plans for the business, met with a lukewarm response in the Square Mile.
Akeroyd said he plans to focus on increasing revenue to £4bn and then £5bn annually (currently £2.8bn), while also pushing profit margins higher and towards the norm in the luxury goods market.
He will do so by emphasising the ‘Britishness’ of the brand.
“We view Burberry's revised strategy as sensible with key focus areas broadly in line with our expectations,” said RBC Capital in a note.
“Targets are also not hugely surprising – we have more belief in [the] £4bn revenue target, and are less confident on EBIT margins significantly above 20%, particularly in the absence of any meaningful gross margin support.”
RBC repeated its ‘sector perform’ recommendation but raised its price target to £20.70 from £18. UBS, in a short missive to clients, repeated its ‘neutral’ call on the stock and £18.38 price target.
Of the 23 brokers and banks logged as followers of Burberry, 18 are ‘neutral’ on the stock. The consensus valuation is £19.52.
Mid-morning the shares were changing hands for £20.52, up 9p. In the year to date, they have advanced 11% against a backdrop of rising inflation and a cost of living squeeze.