Burberry in fashion but consensus stays at 'hold', says Hargreaves Lansdown

15th Apr 2015 10:55

Burberry produced a solid trading update for the second half on Wednesday, though the market reaction was mixed, with strong early gains being mostly erased by mid-morning.Underlying revenues were up 9% year-on-year at £1.42bn in the six months to 31 March, with strong growth in the Americas and Europe, Middle East, India and Africa making up for a subdued performance in Asia Pacific, which was affected by a further deceleration in Hong Kong.Richard Hunter from Hargreaves Lansdown Stockbrokers said the company "remains in fashion"."There are a couple of blots on the landscape for the company, in the form of a decelerating Hong Kong, a high margin market and, from an investment perspective, a relatively paltry dividend yield of 1.7% when set against the current interest rate environment. Even so, the overall picture is extremely healthy," he said.However, a 25% rise in the stock over the last year - the wider FTSE 100 has gained just 7.5% - has "prompt[ed] the market to think that the shares may be up with events for the moment", Hunter said.As such, he said that the consensus view of the group is a 'hold', "albeit a strong one".The stock was up 0.3% at 1,790p by 10:06, having pulled back after touching a high of 1,833p.Concerns about a slowdown in China may also have been weighing on sentiment, given Burberry's heavy exposure to the Chinese luxury sector.Figures released Wednesday showed Chinese gross domestic product rose at an annual rate of just 7% in the first quarter, a six-year low and below the 7.3% growth seen in the preceding three months.