Goldman Sachs slapped a 'sell' on Burberry on the same day it scrapped its formal dress code
- Goldman Sachs relaxed its strict dress code and downgraded the high-end fashion brand Burberry to a 'sell' on the same day.
- Both Goldman and Burberry are trying to appeal to younger generations.
- Watch Burberry trade live.
Goldman Sachs must be tired of thousand-dollar suits and wingtips. On the same day the investment bank relaxed its notoriously strict dress code, it slapped a "sell" recommendation on Burberry's stock.
Goldman introduced a "firm wide flexible dress code" for its roughly 36,000 employees on Tuesday, letting them choose between formal business attire and more casual dress. It's not open season for t-shirts and flip-flops though, as the bank reminded employees that "casual dress is not appropriate every day and for every interaction and we trust you will consistently exercise good judgment in this regard."
Also on Tuesday, analysts at Goldman rejected formal wear, downgrading Burberry to "sell" in their latest note. They "like the long-term equity story at Burberry" and expect its underlying sales to rise 4% in the year to March 2020, but fear that reviving the luxury fashion brand's sales will require more investment in sales and marketing, lowering profits.
Therefore, they slashed their earnings-per-share estimate for Burberry by 11% for the next fiscal year and 18% for fiscal year 2021. As Burberry's shares trade at 24 times their earnings forecasts - a big premium to the average multiple of 17.2 times among its peers - Goldman estimates there is a 5% downside.
Goldman and Burberry's moves show they share a common goal: appealing to the younger generation.
Goldman's decision reflected "the changing nature of workplaces generally in favor of a more casual environment," wrote CEO David Solomon in the internal memo.
"This is a generational thing," a senior employee told eFinancialCareers in an interview about the new dress code. They added that Solomon is doing it to "keep talent" and that "most of the GS bankers are now under the age of 30 anyway."
More than 75% of Goldman's workforce are Millennials or Generation Z, meaning they were born after 1981. Goldman insiders said the dress code was already becoming more relaxed before the formal announcement.
Similarly, Burberry has taken steps to rejuvenate its brand and attract younger shoppers. It has appointed a new creative director, revamped its logo and monogram design, and started to roll out new products every month.
Creative boss Riccardo Tisci launched a line of limited-edition products at the end of 2018 that "resonated strongly with new and younger customers and were endorsed by key influencers around the world," said Burberry CEO Marco Gobbetti in the company's latest earnings report.
Given their established brands and long histories, both Goldman and Burberry could have their work cut out to change how people perceive them.