Burberry among luxury goods stocks just upgraded
The luxury sector has been one of Europe’s best performing over the last 15 years, and some experts think the recent recovery has further to run. City writer Graeme Evans reports.
9th October 2025 15:29
by Graeme Evans from interactive investor
Burberry logo on a London store. Photo: John Wreford/SOPA Images/LightRocket via Getty Images.
Further upside for Burberry Group (LSE:BRBY) shares after their 90% rise since April is among the calls of a City bank after it took a positive stance on prospects in Europe’s luxury goods sector.
Deutsche Bank said that sentiment had shifted quickly during the third quarter as investors positioned for a sequential sales upturn, including a Chinese recovery in 2026.
- Our Services: SIPP Account | Stocks & Shares ISA | See all Investment Accounts
The bank has upgraded Burberry and Lvmh Moet Hennessy Louis Vuitton SE (EURONEXT:MC) to Buy recommendations, alongside its ongoing support for the shares of Hermes International SA (EURONEXT:RMS), Pandora and Ermenegildo Zegna NV (NYSE:ZGN).
Today’s note backs Burberry with a new price target of 1,500p, having seen the shares surge by almost 30% so far this year to 1,250p. They were as low as 628p in the post-tariffs sell-off.
Deutsche Bank said CEO Joshua Schulman’s Burberry Forward turnaround strategy remains on track, highlighting stronger-than-expected levels of sales of growth and signs that the business is reigniting desire in the brand.
It said: “Burberry has taken significant steps over the past year in restoring the timeless Britishness. This is resonating well with luxury customers, shown by the improving brand heat data in Google searches for the brand and likes-per-post on Instagram.
“Consistently communicating the timeless British expression and strengthening its global relevance will support Burberry's return to high single-digit growth in the near to mid-term in our view.”
- UK bank sector results preview: Q3 2025
- Is 4.7% the new magic number for sustainable pension withdrawals?
Such a level would get Burberry back to the kind of performance seen when fashion designer Christopher Bailey and chief executive Angela Ahrendts were at the helm.
The bank said the consistent delivery of high single-digit growth will be key to becoming cash generative and would give the company confidence to reinvest into the business, restarting the virtuous cycle of investments and growth once more.
It added: “As Burberry delivers on top-line and margin expansion, we see real scope for a multi-year re-rating story that could deliver substantial returns by 2030.”
This projection is based on adjusted earnings of about £550 million, comprising a margin of about 17% on sales of £3.2 billion. The company did not pay a dividend when it reported a loss of £66 million in its most recent set of annual results for the year to 29 March.
Deutsche Bank said the improved outlook for inflation, greater design innovation and a better consumer outlook should help the dynamics of the sector.
It added: “Consumer confidence faces less obvious geopolitical challenges in 2026, stock markets remain robust and housing wealth should recover. Chinese willingness to spend on luxury should be answered with sequential improvements from the third quarter.”
- The Income Investor: an alternative for those mulling shift to cash
- Sign up to our free newsletter for investment ideas, latest news and award-winning analysis
The bank points out that luxury companies managed their cost bases more tightly during the recent sales downturn. As some of these savings are structural it sees the potential for a quicker margin rebuild.
It said: “Companies will likely take a relatively cautious view on adding costs back into the business until the sustainability of the sales recovery is clear.”
Deutsche Bank notes the sector has been one of Europe’s best performing over the last 15 years, boosted by high profit margins, robust earnings growth and high barriers to entry.
The bank regards a change in sales trajectory as the catalyst to becoming more constructive, despite there being limited evidence of an underlying improvement in China at this stage.
It added: “There is a discussion to wait and see the evidence before becoming more bullish, but as we saw at the beginning of 2023, 2024 and 2025, the sector re-rated within two months. This time, we see the recovery coming from a more realistic base with a much better risk/reward.”
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.