Broker snap: Buy Burberry on the dips

13th Jul 2010 13:03

The trading update from Burberry on Tuesday was ahead of market expectations and though the near term trading outlook for the luxury goods maker is uncertain given the spell of belt tightening the government wants us to perform, Charles Stanley still thinks the shares are worth accumulating on any dips in the share price."Outlook comments were upbeat. Management considers the group to have had a strong start to the year and believes that the Burberry brand has such momentum that it should continue to outperform irrespective of the economic backdrop," notes Charles Stanley analyst Sam Hart.The broker's "best guess" regarding demand for the company's goods is that it will hold up relatively well and should continue to slowly recover from the depressed levels of 2009. The broker is leaving its full year earnings forecasts unchanged for now but likes the long term prospects for the good."We believe luxury goods remain a structural growth market, driven by rising disposable incomes in emerging markets, the growing number of high net worth individuals, more aspirational consumers, increasing spending power of working women and a growing propensity to travel," Hart states. "Following strong recent performance, the valuation looks well up with events, but we would add to holdings on any signs of sustained profit taking. The recommendation remains Accumulate," the broker concluded.