UBS says Burberry could get a Brexit boost due to the fall in sterling

Helen Cahill
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Burberry Brings London To Shanghai - Inside
The brand may want to celebrate the result of the EU referendum (Source: Getty)

Burberry may have been struggling with weak sales recently, but UBS reckons the luxury retailer could be set to benefit from the sharp fall in sterling following the Brexit vote.

UBS upgraded Burberry's target price to 1,700p from a previous 1,550p and re-stated its "Buy" rating for the luxury brand, saying the "weak pound more than offsets weak sector trading."

The news may come as a surprise for the brand, who warned staff of the "unnecessary economic consequences" of Brexit, saying the company would be "stronger and more prosperous" inside the EU.

"We believe Burberry remains attractive post the recent market dislocation and reiterate our Buy rating," said Helen Brand, UBS' luxury goods analyst.

Read more: Burberry issues staff with Brexit warning

Burberry's share price was up 0.17 per cent in afternoon trading, at 1,163p. The company's strategy is to attract travelling Chinese sellers, and could therefore be one of the winners from the Brexit vote.

UBS said that like-for-like sales growth at the brand is likely to be negative this year due to a difficult trading environment.

Read more: Burberry's Christopher Bailey got a massive pay cut

Brand said: "Recent sector data points continue to be weak. For instance this includes the Global Blue tourism data and Hong Kong retail sales. We therefore see no reason to expect an improvement in like-for-like in the first quarter and forecast it down minus five per cent despite a slightly easier comparison base."

Burberry will report its retail sales for the first quarter on 13 July.

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