Broker snap: Margins to fall at Burberry, says Nomura

3rd Oct 2011 09:48

Nomura has kept its neutral rating on British luxury brand Burberry ahead of the group's first half trading update on 12 October.The broker expects Burberry to report 29% constant currency sales growth to £820m, but forecasts a 50 basis point decline in the first half earnings before interest and tax margin in the key retail/wholesale division, due to operating costs (including investment in flagships, customer services and share schemes)."Burberry's strategy of reinvesting underlying gains to drive further growth is working with arguably some of the greatest gains to come following this year's flagship, creative, service and digital investments."Despite keeping its neutral rating, the broker said that given the recent pullback in the shares, the stock offers some upside to its 1,356p target price.BC