Credit Suisse expects no profit growth from Burberry this year

17th Apr 2014 11:12

Credit Suisse has trimmed its estimates for Burberry and kept a 'neutral' recommendation, saying that profit growth at the high-end luxury firm will 'take a break' this year."As much as we like Burberry's superior long-term top-line story, we see group margins under pressure in the next two years, which should put a lid on the shares," the bank said.Burberry's second-half trading update on Wednesday said that foreign exchange (FX) rates would have a "material adverse impact on reported profit" in the year ending March 2015.This, along with "relatively light" wholesale guidance, has led Credit Suisse to cut its profit before tax forecast for the current year by 7% to £468m.The bank's new estimates essentially imply no earnings per share growth for Burberry this year, which "clearly trails the +6% average growth for the luxury sector".Credit Suisse said this supports its thesis that Burberry's superior top-line momentum is unlikely to translate into superior earnings growth against peers over the next two years.This is "due to upcoming changes in business model in Japan, on-going reinvestment requirements to sustain its comps outperformance and to develop a materially bigger presence in a highly competitive beauty market, and a material FX headache", it said. The bank maintained its 1,600p target price for the shares.The stock was down 1.7% at 1,441p by 11:23 on Thursday, pulling back after a 2.2% gain the previous session.BC