Burberry Investment Upgrade by Bernstein

Investing.com – Bernstein upgraded its investment stance on Burberry (LON:BRBY), indicating that the British luxury fashion house is on a recovery path by returning to its roots.

At 10:55 ET (14:55 GMT), Burberry stock rose 1% to £7.55, although it remains down over 46% year-to-date following a profit warning in July when first-quarter retail revenues decreased by 22%.

Bernstein regards the appointment of new CEO Josh Schulman as a positive move towards a more realistic product and pricing strategy, suggesting that reviving Burberry should be easier due to its clear brand identity.

> “Britishness, the trench coat, the check pattern shall become once again the cornerstone of a brand relaunch,” Bernstein noted in a report dated Oct. 30.

The investment bank noted that Burberry's pricing strategies are becoming more coherent, specifically in leather goods, which could lead to significant opportunities.

> “The price of handbags from the most reputed brands has increased significantly post-COVID. This creates a substantial opportunity for Burberry. The brand should revert to being a price follower in handbags, which it can successfully do,” Bernstein remarked.

However, Burberry is expected to face at least six challenging months ahead. Difficult market conditions and the legacy of ineffective brand management will likely lead to short-term operating losses.

> “But the brand is worth much more than its current trading price, and even a slight improvement will likely be rewarded by the market,” Bernstein concluded.

Bernstein upgraded Burberry to ‘outperform’ from ‘market perform,’ setting a new price target of £9.30, up from £6.80, translating to a 24% upside.