Burberry is flagging a “more challenging external environment” and we expect the shares to suffer due to this comment and the small miss. We note, however, that full year guidance appears unchanged and the first quarter is Burberry’s smallest quarter. This year is also against the toughest comparatives (comparatives progressively weaken through the year)... We are happy to remain long-term buyers of the stock.
Despite the lower than expected retail comparable sales growth number, we are maintaining our 2013 pretax profit forecast of £442m as comparables are weaker in the second half. The lack of an upgrade means we do expect the shares to be weaker (yesterday) but we see this as a buying opportunity as we consider Burberry a strong long term growth story and with significant geographical and product mix opportunities as well as operational leverage to come.
Burberry shares have fallen foul of great expectations, as robust sales growth came in shy of analyst estimates. In a strange parallel to the Chinese economy, where the slightest slowdown in growth filters through to a drag on investor sentiment, Burberry is being taken in isolation. If set against M&S’s update on Tuesday, for example, the numbers are in a different league, as are the prospects. But the shares’ valuation is quite full and weight of expectation is heavy.