Nomura has increased its target price for luxury brand Burberry from 1,210p to 1,350p after raising its earnings forecasts by one per cent following the company's third-quarter results.

Third-quarter sales came in at £613m, up 9% on an organic basis and £14m better than Nomura expected. This was driven by a strong performance in Retail which offset a weaker showing from Wholesale.

"After an uneven quarter, a particularly strong week pre-Christmas and product strength in festive categories such as soft accessories and men's tailoring and accessories, digital and core outerwear helped lift an 'otherwise difficult quarter' where 'footfall remained soft'," Nomura said.

However, Burberry has updated its guidance for Wholesale sales, saying it expects a low- to mid-single-digit organic decline in the second half, compared with a previous flat expectation. Nomura expects a 3.6% fall, which it says cancels out £8m of the revenue beat from the third quarter.

"We also assume this will continue into 1H 2013/14 and tweak down our wholesale expectation to 1% from 3% for 2013/14."

While the broker says that Burberry is "executing well on retail and merchandising strategies", it has retained its 'hold' rating on the shares.

Nomura pointed out that at its new target price (1,350p), the stock is trading at 16.6 times earnings, in line with the five-year average.

Shares were up 3.85% at 1,376p by 10:01 on Tuesday.

BC

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