Nomura forecasts above-average growth at Burberry ahead of results

13th May 2015 11:12

All eyes will be on the outlook at luxury fashion house Burberry when it reports its full-year results next week, according to broker Nomura which reiterated its 'buy' rating on the stock on Wednesday.The broker said Burberry trades at 21.4 times earnings - a warranted premium to the sector given the company's attractive digital-led strategy, with upside to medium-term margins and cash generation.Burberry has already reported second-half sales figures so the bottom line will grab attention on 20 May, with Nomura forecasting a pre-tax profit of £456m for the year ended 31 March, in line with consensus forecasts and up from £444m the previous year.Profit margins in retail and wholesale combined are predicted to have fallen by 127 basis points (bp) to 16.2%.Nevertheless, the broker said that organic growth and margin assumptions for the current year will be the focus of the report."Following a strong year in FY14/15, with the relaunch of the heritage trench collection, the focus will be whether Burberry can continue to drive like-for-like growth. In our view, it is well positioned for above-average growth, given digital initiatives and strong conversion,""On margin, forex will become a tailwind (c£50m) in the year ahead, but the company highlights an offset through geographical/channel mix as well as Japan and ongoing investments. We forecast 40bp expansion for FY15/16 for the retail/wholesale margin."Nomura maintained a 1,990p target price for the shares, which were up 1.1% at 1,776p by 11:11.