Shares of the UK-based Burberry Group PLC (GB:BRBY) soared yesterday over the speculation of a potential deal with Italy’s fashion brand Moncler S.p.A. (IT:MONC). The fashion and luxury news publisher Miss Tweed reported the chatter with the industry about Moncler’s potential interest in acquiring Burberry. Following the news, BRBY stock gained 6% on Monday, whereas Moncler shares fell 2.08%.
Burberry Group is a global luxury brand specializing in clothing, footwear, and accessories. Meanwhile, Moncler is an Italian fashion label and lifestyle brand known globally for its down jackets and activewear.
Potential Moncler-Burberry Deal Offers BRBY Stock Relief
The buzz around a potential deal between Moncler and Burberry was a slight relief for BRBY stock. According to the reports, Bernard Arnault, CEO of French luxury products company LVMH (FR:MC), is enthusiastic about this deal’s potential. Arnault’s luxury conglomerate recently invested in Moncler. However, both companies have refused to provide official statements on these market rumours.
Year-to-date, BRBY stock has lost nearly 40% due to a slowdown in luxury sales and a challenging outlook ahead. In FY24, Burberry adjusted operating profit dropped 25% at CER to £418 million, while adjusted pre-tax profit fell to £383 million from £613 million in FY23.
Moving ahead, the company expects an operating loss for the first half of FY25. Additionally, the full-year operating profit is likely to fall below current expectations. The company has already suspended its dividend payments for FY25.
Burberry will publish its interim results for FY25 on November 14.
UBS Analysts Weigh in
Yesterday, analyst Zuzanna Pusz from UBS confirmed a Sell rating on BRBY stock, predicting a further downside of 52%.
Pusz stated that Moncler’s interest might be driven by Burberry’s recent drop in market value, as its shares have fallen almost 50% over the last 12 months. She expects Burberry shares to react positively to the news of a possible deal, given its recent financial difficulties. However, the response for Moncler’s stock could be more complicated.
Is Burberry a Good Stock to Buy?
According to TipRanks, BRBY stock has received a Hold consensus rating, backed by seven Holds, four Sells, and one Buy recommendation from analysts. The Burberry share price target is 640.83p, which is 25% below the current trading level.
See more BRBY analyst ratings.
