Burberry shares rise after Goldman Sachs highlights potential earnings growth

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By Scott Kanowsky 

AiVIF.com -- Shares in Burberry Group PLC (LON:BRBY) jumped on Wednesday after analysts at Goldman Sachs said the luxury goods brand is potentially on course to enter a phase of strong performance.

In a note to clients, the investment bank's analysts described Burberry as "uniquely positioned" in its coverage, raising their growth forecasts for the firm's 2024 fiscal year to 10.5% on a like-for-like basis from its prior estimate of 7.2%. Consensus predictions have placed the figure at 6.3%.

"Whilst we acknowledge several unknowns, we have a positive view on the plan in place, to drive higher store productivity, which is key to margin expansion," the Goldman Sachs analysts said.

Profit margins at the British trenchcoat maker have been under pressure compared to its Italian and French rivals due in part to the company's product mix. Jonathan Akeroyd, who took over from Marco Gobbetti as chief executive officer in 2022, is aiming to eventually increase annual sales to £5 billion (£1 = $1.2053) and operating margin to above 20%.

Akeroyd has called for the 166-year-old brand to refocus on its "Britishness," saying it will help the firm carve out a place for itself in a competitive luxury market. Designer Daniel Lee is set to unveil a new collection in February.

Akeroyd will also look to raise volumes for higher margin items like leather goods and accessories, while also boosting online demand and doubling sales per square foot in Burberry locations.

In November, Burberry reported better-than-expected quarterly growth in comparable store sales, thanks to tourists spending big at the company's sites in key destinations like Paris, London, and Milan.

The company also backed its near-term guidance for revenue expansion in the high-single digits and margin of around 20% by the end of its 2024 financial year.