HSBC reiterates 'buy' but cuts target price on Jimmy Choo

1st Jul 2016 10:10

(ShareCast News) - HSBC maintained its 'buy' rating on Jimmy Choo on Friday, after the luxury shoe maker said it was off to a good start to the year.In Jimmy Choo's 15 June trading update, it said had been trading in line with expectations so far this year despite tough trading conditions.The group added that it expected a pick-up in margins and good cash generation on the back of improved operating efficiency."We believe this statement proves that the Jimmy Choo story is fundamentally unchanged," said HSBC."Besides, Jimmy Choo is among the very few names which will benefit from the further weakening of the GBP, however, as we outlined in our June 16 Brexit Deluxe report, Brexit will certainly weigh on the high end consumer psyche which has not yet recovered from previous shocks and Jimmy Choo should remain resilient but not immune."A weaker pound is expected to boost full year 2016 earnings. HSBC estimates EBITDA of £62m, up from £51m the previous year. The bank has forecast 2016 sales of £368m, up 16% reported and 6% at constant foreign exchange with retail up 7%.However, HSBC cut its full year 2016-17 earnings per share estimates by 4-6% due to a higher tax rate.The bank also slashed Jimmy Choo's target price to 140p from 165p due to higher weighted average cost of capital.Shares in Jimmy Choo rose 0.60% to 109.75p at 1016 BST.