Broker snap: Forecasts reduced at Burberry, but still a 'buy'

11th Jul 2012 11:32

Nomura has reduced its target price for luxury brand Burberry after a slower first quarter, though the broker maintained its 'buy' recommendation for the stock.First-quarter sales were around 2% below consensus forecasts with retail comparable store sales growth coming in at 6% compared with last year's 15%.Nomura has lowered its full-year comparable store sales growth estimate from 8% to 5% and retail/wholesale margin growth forecast from +80 basis points to +60 basis points. Revenue forecasts for the year ending in 2013 have been reduced from £2,097m to £2,064m while the net income prediction is scaled back from £321m to £314m. The adjusted earnings per share (EPS) figure for the year comes from 72.25p to 70.67p.Given the recent pull back in the sector and its reduced estimates, the broker has lowered its price target from 1,530p to 1,450p.However, analysts said: "Strong relative brand momentum, high ROIC retail store roll out and an ability to deliver further margin gains in more difficult times for a compound annual growth rate of 15% three-year forward EPS growth estimate remain compelling reasons to further capitalise on any pullback in the shares, in our view."Investec also reiterated its 'buy' rating on the stock this morning, saying: "We would highlight that Q1 is the smallest quarter for Burberry and is against the toughest comp this year."The broker said it would review its forecasts for the group after a conference call with the firm but is "happy to remain a buyer".Shares had dropped 6.39% to 1,202p by 11:29.BC