Burberry: Shares spike as luxury giant’s transformation shows green shoots
British luxury brand Burberry has reported a boost in demand for its core products after implementing a wide-ranging turnaround plan, although overall revenue has continued to fall.
The company’s share price rose more than 14 per cent in early trades.
Total retail revenue in the 13 weeks ended December 28 fell seven per cent, from £706m in the third quarter of 2023 to £659m in the third quarter of 2024.
This was driven by contraction in Burberry’s Asia Pacific market, which has seen a notable slowdown in the last two years due to an economic downturn and a trend to ‘quiet luxury’.
In America, sales grew four per cent quarter on quarter – the only area to show growth year on year. Many analysts expect America to drive growth in luxury this year as Donald Trump implements his tax cuts.
The luxury brand said it was now “more likely” that its second-half results will offset the first-half adjusted operating loss, “notwithstanding the uncertain macroeconomic environment”.
Burberry is currently in the midst of an ambitious turnaround plan, implemented after a tough trading period which saw it fall out of the FTSE 100 when its share price cratered more than 90 per cent in less than a year and a half.
In its first-half results, the brand reported an operating loss of £53m, down from a profit of £223m in 2023.
“Since launching Burberry Forward in November, we have moved at pace to advance our strategy to reignite brand desire, improve our performance and drive long-term value creation,” chief executive officer Joshua Schulman said.
“The acceleration of our core categories [outerwear and scarves] reinforces our belief that Burberry has the most opportunity where we have the most authenticity and that our strategic plan will deliver sustainable, profitable growth over time.
“However, we recognise that it is still very early in our transformation and there remains much to do,” he added.
The turnaround plan, dubbed ‘Burberry forward’ saw the brand appoint new leaders across its marketing, product merchandising and Americas divisions, remove £40m of costs, and pivot to outerwear.
Thumbs up from analysts
Investors are likely to continue their recent appreciation for the stock after jumping ship throughout the first nine months of last year, analysts agreed. Burberry’s share price has more than doubled after hitting a 15-year low in September.
Burberry’s performance in the third quarter was “well ahead of expectations,” RBC analyst Piral Dadhania said, but equally “consistent with new chief executive Joshua Schulman’s strategy to re-centre the brand to areas of core competence”.
“We view these results as a first (and early) step in the right direction,” Dadhania said.
Easy fixes relating to store layout and presentation, refocus on core product categories, and certainly contribution from markdown activity have all contributed to the improvement.
Robinhood UK lead analyst Dan Lane said that “the point of maximum pessimism is behind [Burberry]”.
Naomi O’Donnell, senior brand strategy consultant at Yonder Consulting, said: “While it may be too early to assess its full impact, Schulman is making strides to reconnect Burberry with its roots.
“Schulman’s approach isn’t just about returning to heritage; it’s also about reimagining how the brand engages with its audience. For the first time, Burberry has clearly articulated its customer segments through five distinct archetypes, giving the brand much-needed clarity and direction in a way that had been lacking in previous years.
“This focus on understanding its customer base could prove pivotal for Burberry’s future.”
Takeover talk goes quiet
Last Autumn, rumors swirled that Italian outerwear brand Moncler. was ready to swoop in with a takeover offer for Burberry.
Both parties denied the rumours and no deal materialised, but analysts agreed Burberry could be target due to its low valuation and rich history.
However, an “opportunistic deal will look less attractive the more Burberry’s strategy, and share price, show sustained promise”, Lane said.
“If something is brewing, it’s likely to be more thoughtful than it would have been during September lows and means now is likely the time a buyer needs to come out of the woodwork, before it’s too late and the turnaround really starts to motor.”