Seymour Pierce has reiterated its 'hold' rating and 1,200p target price for luxury brand Burberry ahead of the group's pre-close trading update for the second quarter on Thursday.

The company disappointed on September 11th after an unscheduled trading update covering the 10 weeks to September 8th revealed a material slowdown in the retail business. Shares have fallen around 24% since then.

This week's update will cover the remaining three weeks of the second quarter to the end of September, Seymour Pierce said.

"We are forecasting Q2 retail comparable sales growth down 2% with total sales at constant currency up 5%," said analyst Kate Calvert.

She said that the key focus will be for news on whether the retail slowdown has worsened or stabilised, how the stock position is and, more importantly, the management's expectations for the wholesale business for the spring/summer 2013 collection.

"While other luxury players have also spoken about a slowdown, there is concern from some quarters that there is a brand issue and management has pushed some of its prices too high," Calvert said.

"Ultimately, this slowdown is nothing like the brick wall that impacted the sector in 2008 when the financial crisis hit. Indeed, Burberry is in a much stronger position, brand and infrastructure wise, to react to a slowdown given recent systems investment so is unlikely to have the same stock issues. However, we can not see Burberry's shares performing until there is better news on demand."

By 10:33 on Monday, shares were down 1.17% at 1,016p.

BC

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