Burberry’s profits will be boosted by the slump in the value of sterling following the UK’s vote last week to leave the European Union, analysts have predicted.
Burberry’s autumn 16 London Fashion Week presentation
Bank of America Merrill Lynch has upgraded Burberry to a “buy” rating, predicting its annual profits will increase by £97m.
“GBP weakness has created a significant tailwind, which we think is yet to be reflected in consensus earnings or its valuation,” the bank said.
”Though we remain cautious on the luxury sector, we believe the earnings upgrade story at Burberry will help support outperformance relative to sector peers.”
Elsewhere, Angus Cundey, chairman of Savile Row tailor Henry Poole & Co, played down fears luxury businesses will be hit hard by the Brexit vote.
“Despite the apparent world turmoil, I do not consider Brexit will in anyway damage Savile Row tailoring companies,” he told the Evening Standard.
However, as fashion businesses continued to react to the news, European chain Esprit warned that the vote could affect consumer sentiment in its key markets.
“There is risk for an impact on the general consumer sentiment across Europe, where the majority of our business is located, but it is impossible to predict its timing and reach,” Esprit’s chief financial officer Thomas Tang told Reuters.