Shares of the FTSE 100-listed luxury retailer Burberry Group PLC (GB:BRBY) hit their 15-year low today after Barclays analyst Carole Madjo downgraded her rating for the stock from Hold to Sell. Madjo also reduced her price target for the stock from 820p to 540p, forecasting a downside of 4.42%. Following the downgrade, BRBY stock fell over 7% to 571p, a level not seen since November 2009.
Additionally, Burberry is the only company to be removed from the FTSE 100 in the upcoming quarterly reshuffle on September 23.
Burberry Group is a global luxury brand that specializes in clothing, footwear, and accessories across various markets.
Barclays Remains Cautious About the Luxury Sector
Madjo remains increasingly cautious about the luxury sector due to persistent headwinds in China. Barclays highlighted that the macroeconomic environment worsened during the summer, now indicating that China’s economic weakness is structural rather than just cyclical. This will lead to a significant drop in summer sales in Mainland China (up to around 50%).
Overall, Barclays now expects a 4% growth in the luxury goods sector for 2025, down from the previous forecast of 7%.
Barclays Holds a Bearish Stance on Burberry
Madjo stated that even though Burberry is already struggling, she thinks the company could face more problems. The analyst is concerned that Burberry might not stay a top luxury brand because it hasn’t been consistent with its full-price strategy.
Barclays believes Burberry will report a loss for the first time for the first half of 2025. In July, Burberry mentioned that it expects to report an operating loss for the first half of FY25 and expects full-year operating profit to fall short of current estimates. The company also suspended its dividend payments for FY25.
Moving ahead, Barclays doesn’t see a quick recovery in Burberry’s profit margins, given that the challenging environment is expected to continue next year.
Is Burberry a Good Stock to Buy?
On TipRanks, BRBY stock has received a Hold rating, backed by a total of 13 recommendations from analysts. It includes 12 Holds and one sell rating. The Burberry share price target is 870.91p, which is 54% higher than the current trading level.
