On Friday, UBS changed the rating for Burberry Group (OTC:BURBY) PLC (BRBY:LN) (OTC: BBRYF) stock from "Sell" to "Neutral," and increased the price target significantly to GBP9.75, up from the previous GBP4.10. This adjustment follows Burberry (LON:BRBY)'s announcement of its first-half results, which surpassed expectations.
Burberry reported a smaller-than-anticipated decline in second-quarter like-for-like sales, with a 20% drop compared to the consensus estimate of a 21% decrease and UBS's forecast of a 24% fall.
Additionally, the luxury fashion company posted a lower first-half loss of GBP41 million, which was more favorable than both the consensus estimate of GBP46 million and UBS's projection of GBP63 million. This was attributed to effective cost control measures.
The same day as the financial results were disclosed, Burberry's new CEO, Jonathan Akeroyd, unveiled an updated strategy aimed at returning the brand to its roots, focusing on outerwear, heritage, and more accessible price points. This shift comes after years of efforts to elevate the brand that did not meet expectations and deviations into seasonal fashion trends.
UBS acknowledged the strategic update as a positive move that could lead to a short-term improvement in sales momentum. While there remains skepticism regarding Burberry's long-term profitability, the firm anticipates that these concerns will not be immediately relevant. UBS is closely monitoring Burberry's future developments following these changes.
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