Burberry Group - 12m target downgrade
* Following the recent Paris events, we cut our estimates and consequently lower our target
price from £1,400p to £1,300p, a 7.0% cut vs a decline of 4-5% on average for the soft luxury
companies we cover (see detailed sector note for more information).
* Burberry’s exposure to France represents 6-7% of sales, in line with the sector average,
and it generates c.24% of its sales in Europe, well below the peer average.
* Our TP is an average of an SOP (Retail/Wholesale 87% and Other 13%) and a DCF (10.0%
WACC; 4% terminal growth).
* Risks to TP: upside – better sales growth sustainability in the US and APAC than in SGe;
downside – less successful Japan relaunch than we expect in a crowded market with a lot of
competition.