FX headwinds growing at Burberry, says Credit Suisse

17th Jun 2014 10:12

Credit Suisse has maintained its 'neutral' stance on high-end fashion group Burberry, saying that recent currency movements are impacting it more than its luxury peers.The foreign exchange (FX) environment has become "even more challenging", the bank said.It pointed out that the pound has appreciated further against the dollar since Burberry guided to a £40m currency headwind on pre-tax profit in May.Meanwhile, the weaker euro is "unfortunately not enough to offset other cost pressures like high rent inflation especially in China", Credit Suisse said."Since we do not see Burberry's superior organic sales growth translating into superior earnings growth, we see a 'neutral' rating as appropriate."Meanwhile, after consecutive quarters of outperformance against others in the sector, Burberry is also now facing difficult comparatives.Ahead of the company's first-quarter trading update next month, Credit Suisse said that Burberry's shares are trading at a modest premium to the sector at 18 times calendar year estimated earnings for 2015.The bank maintained a 1,620p target price for the stock, which was 0.6% higher at 1,458p by 10:23 on Tuesday.BC