- Sales ahead of forecasts
- Shares jump at the open
- Analyst questions valuation
UK fashion house Burberry (BRBY) posted a slightly smaller drop in first-quarter sales than had been expected and said it was ‘encouraged’ by the initial progress of its turnaround plan.
To begin with investors seemed to agree, with the shares trading up as much as 72p or nearly 6% at £13.20, but the enthusiasm quickly waned leaving the shares trading around the previous day’s close by mid-morning.
SIGNS OF IMPROVEMENT
For the 13 weeks to the end of June 2025, retail revenue reached £433 million, down 6% on a reported basis but only 1% on a same-store basis against market forecasts of a 3% decline.
During the quarter, the firm implemented its Burberry Forward action plan, resulting in an improvement in like-for-like retail sales across all regions relative to the previous quarter ‘supported by stronger brand desirability, outperformance in outerwear and scarves and improved conversion’.
Sales in the Americas and EMEIA (Europe, Middle East, India and Africa) were up 4% and 1% respectively, while Greater China (including Hong Kong and Taiwan) and Asia Pacific sales (including Japan, South Korea, Southeast Asia, Australia and New Zealand) were down 5% and 4% respectively.
‘The improvement in our first-quarter comparable sales, strength in our core categories and uptick in brand desirability gives us conviction in the path ahead,’ commented chief executive Joshua Schulman.
‘Our Autumn 2025 collection is being well received by a broad range of luxury customers as it arrives in stores. Although the external environment remains challenging and we are still in the early stages of our transformation, we are encouraged by the initial progress we are starting to see.’
Looking ahead, Schulman said Burberry’s focus was to build on the early progress made in ‘reigniting brand desire’ as a key requisite to growing the top line.
‘In the first half we are continuing to prioritise investment and expect to see the impact of our initiatives build as the year progresses. We will deliver margin improvement with a continued focus on simplification, productivity and cash flow. We remain confident that we are positioning the business for a return to sustainable, profitable growth.’
ANALYST VIEW
Jefferies luxury analyst James Grzinic cautioned investors not to get carried away and to consider that while year-on-year trading was ahead of consensus, it should be seen in the context of a very weak prior-year performance.
‘That all the right steps have been taken is not up for debate,’ commented Grzinic. ‘Perhaps more open to interpretation is the extent to which flattish sales compared to the depths of last year’s challenges should be rewarded with a March 2027 PE of over 32 times (on consensus margin forecasts of around 9%).
‘The group would require a very sharp rebuild in (still markedly industry lagging) sales densities to support a blue-skying of mid-term recovered margins.’
Burberry shares are up more than 25% year-to-date but more significantly have more than doubled since their April 2025 lows of around 630p.
