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(Sharecast News) - RBC Capital Markets downgraded Burberry on Tuesday to 'sector perform' from 'outperform' and slashed the price target to 1,200p from 1,400p.
The bank said Burberry is executing well in a challenging luxury environment, with improved product/price architecture, better instore merchandising for key categories and a clear and agreeable strategy.
"However, this strategy relies largely on volume and mix contribution with limited price, and we view the volume component as under incremental pressure given the luxury demand environment remains lacklustre," it said.
RBC also said that consensus estimates anticipate a continuation of 5-6% revenue growth and 200 basis points EBIT margin expansion in FY29, which it believes is too optimistic in the absence of additional cost reduction actions, such as store closures.
RBC Capital cut its FY28-29 earnings per share estimates by 6-8%, leaving it 7-11% below consensus expectations.
At 1004 BST, the shares were up 1.6% at 1,042.50p.
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