Shares in Burberry rise 2.9 percent, outpacing a 0.5 percent fall on the FTSE 100 .FTSE, as Goldman Sachs upgrades its recommendation for the company to "neutral" from "sell" in a review of the retail and luxury goods sector.
The broker also upgrades its stance on Italian jeweller Bulgari BULG.MI to “buy” from “neutral”, with the luxury brand rising 0.5 percent.
Goldman Sachs sees a divergence between consumer expenditure growth in mature markets and faster growing emerging markets, and likes firms that have emerging market exposure, the ability to leverage structural changes in the industry and restructure cost base.
The broker says Burberry’s returns were improving, following strong first-half figures last week, and forecasts sales to grow 8.5 percent in 2011 and 10.9 percent in 2012 estimates, both above I/B/E/S consensus.
“Burberry is therefore now attractive enough on our 12-month forward EV/EBITDAR valuation to screen as a Neutral,” the brokers analysts say.
On Bulgari, the broker says the company is well positioned to benefit from a normalisation of sales and would benefit from surprise from its very low base of comparison in Q3 2010. The progressive end of destocking at retailers and good cost containment efforts are also expected to help the firm in the third-quater.
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