Burberry: Deterioration in Revenue Hits Profit, but Shares Still Look Attractive

We are reducing our fair value estimate for narrow-moat Burberry to GBX 2,100 from GBX 2,460 as the company significantly reduced its full-year profitability outlook for the financial year ending March 2024. Operating profit is now expected to be within the range of GBP 410 million-GBP 460 million, down from the lower end of GBP 550 million guidance communicated in November 2023 with its first-half 2023/24 results, implying a 20% downgrade at the midpoint. We still view shares as cheap at current levels.