Burberry set to score a Brexit win on the weaker pound

Helen Cahill
Follow Helen
Burberry Body Event Hosted By Christopher Bailey And Rosie Huntington-Whiteley In Beverly Hills - Red Carpet
Burberry targets travelling Chinese consumers and could be a winner from Brexit (Source: Getty)

Luxury clothing brand Burberry is expected to announce better-than-expected results this week due to the fall of sterling since the Brexit vote.

Analysts expect the FTSE 100 fashion brand to report a five per cent fall in like-for-like sales on Wednesday, but have adjusted profits estimates due to a weaker pound.

On the day before the EU referendum, Burberry warned staff about the "unnecessary economic consequences" of Brexit, saying the company would be "stronger and more prosperous" inside the European Union.

Despite this, the company is expected to benefit from sterling's fall against the dollar. Sterling fell below $1.30 for the first time in more than three decades last week after leading property funds suspended redemptions as investors scrambled to withdraw cash.

UBS' luxury goods analyst Helen Brand said the "weak pound more than offsets weak sector trading" at Burberry, upgrading profits before tax by nine per cent to reflect the depreciation of the pound.

Burberry has been battling against a fall in Chinese visitors to Hong Kong, but the fall in sterling could mean Burberry benefits from increased tourist trade in the UK.

UBS increased the luxury retailer's target share price from 1,550p to 1,700p and restated its "Buy" rating for the brand. The company's share price is now at about 1,160p.

Michael Hewson, chief market analyst at CMC Markets UK, said Burberry's "exposure to overseas markets could well see its profits get a bounce on the back of the weakness of the pound when it updates the markets next week."

Related articles