Increased share of Daniel Lee''s products not leading to immediate turnaround In 3Q (ending Dec 23), Burberry Retail comps were down 4%, with Dec down HSD. This followed a 2Q (ending Sep 23) with a +1% Retail comp and Sep down MSD. What Sep and Dec had in common is that both saw a sequential step-up in the share of new Artistic Director Daniel Lee''s products within total assortment in stores. While it might be premature to draw conclusions about the success of Burberry''s brand re-launch, we believe it is fair to say that, at best, a potential turnaround will take longer than expected due to (i) the ongoing luxury sector normalisation leading to consumers trading less, ie still buying desirable brands (''safer bets'') but not keen on revisiting brands undergoing a designer change such as Burberry, (ii) the more commercial part of Lee''s offering yet to come after an initial focus on more fashion-oriented (and potentially too high-priced) products, and (iii) recent marketing campaigns being focused on the overall brand image rather than specific products. Apparel/fashion skew and lower margins hurt in tougher times After increasing marketing spend by c30% in 2022 and c25% in 1H23, luxury peer LVMH can now cut marketing for 4-6 quarters without relative brand momentum being affected: Margin protection matters, even in Luxury. Burberry is different: lower-than-expected top line translated to a c100bp FY March 24 GM guidance cut and an increase in the FY March 24 opex guidance from LSD to MSD (marketing budgets kept unchanged, some possible impairments/one-offs). In addition, mathematically, margins come down more rapidly for companies with margins below 20%. TP cut to 1,470p (from 1,720p); we are 9-11% below consensus We cut our DCF-based TP to 1,470p (from 1,720p) on the back of our c24% estimate cuts and slightly higher WACC (10.7% vs 10.5%). Shares have lost half of their value since the 25 April 2023 peak of 2,656p after two profit warnings. While at...