On Monday, Barclays downgraded Burberry Group (OTC:) PLC (BRBY:LN) (OTC: BBRYF) stock from Equalweight to Underweight, adjusting the price target to GBP 5.40 from the previous GBP 8.20. The move reflects a negative outlook on the luxury fashion company’s current strategy and market position.
The downgrade follows a visit by the firm’s analysts to China, where observations led to concerns about Burberry’s luxury brand positioning. Promotions and a significant presence in outlet stores are believed to be putting the brand’s equity at risk. This strategy could potentially have a detrimental, long-term effect on Burberry’s reputation in the high-end market.
Adding to the luxury retailer’s challenges, Burberry is anticipated to post losses for the first time in the first half of 2025. The forecasted downturn in profitability comes amid a tough climate for the luxury sector, compounded by low brand momentum. According to Barclays, Burberry’s recovery from these setbacks may be a prolonged process.
The recent appointment of a new CEO at Burberry is also causing uncertainty regarding the future direction of the brand. The firm suggests that this change in leadership raises more questions than it provides answers at this critical juncture for the company.
Barclays’ decision to downgrade Burberry’s stock is based on these fundamental concerns. The firm expresses difficulty in justifying an Equalweight rating when it anticipates that Burberry will likely underperform in its sector for the foreseeable future.
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