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Despite Burberry Buzzkill, Analyst Sees Opportunity

Luxury retailer Burberry released lower-than expected earnings results on Wednesday, adding to growing anxiety about China’s impact on the sector. Despite this, one analyst sees bright spots in high-end retail.

A young couple makes a purchase at a Burberry luxury store.
Getty Images
A young couple makes a purchase at a Burberry luxury store.

Burberry , which derives 37 percent of its revenue from the Asia-Pacific region, saw its growth rate cool due in part to a slowdown in China’s growth. However, Erika Maschmeyer, an analyst at Robert W. Baird, emphasized that China is not a new issue, and much of the concern is already baked into luxury retail stocks.

“From an investment standpoint there are really attractive opportunities within the sector,” she said. “In particular, I think that within affordable luxury there is an opportunity.”

So far, Maschmeyer told CNBC’s “Closing Bell” that she is seeing a softer landing for the sector, rather than a hard one.

She cited Coach as an example of an affordable high-end retailer that has seen growth recently from entering China. The New York City-based company is growing rapidly in the market, and Maschmeyer thinks it can gain further market share, especially in the men’s segment.

Although Coach Charmin and CEO Lew Frankfort said as recently as March that he was not seeing a slowdown in China, Stacey Widlitz, president of SW Retail Advisors and CNBC contributor, said a lot has changed since then.

“We continue to get data from retailers and out of China saying growth in slowing there, and you really can’t ignore it — Burberry is just the latest today,” Widlitz said.

Coach , which reports at the end of the month, recently warnedthat it is beginning to see a slowdown in its tier-one markets. Still, Widlitz said the question remains whether it is also seeing growth decelerate in its smaller, less well-off tier two cities.

—BY CNBC.com’s Katie Little

Additional News: Luxury Sales Hit by ‘Challenging External Environment’

Additional Views: Trouble at the High End?

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Disclosures:

Stacey Widlitz owns stock in Tiffany, but does not own stock in Coach.

Disclaimer

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Follow Katie Little on Twitter @katie_little.