Burberry and Diageo benefit from luxury giant’s huge rally
Figures from one of the world’s largest luxury brands points to China-led recovery in the sector. Graeme Evans explains why that’s feeding through to these FTSE 100 stocks.
15th October 2025 15:41
by Graeme Evans from interactive investor
A Burberry store in Sanlitun, Beijing. Photo: Christopher Pillitz/Getty Images.
Encouragement for Burberry Group (LSE:BRBY) and other luxury goods stocks after Lvmh Moet Hennessy Louis Vuitton SE (EURONEXT:MC) reported a surprise return to quarterly sales growth today failed to extend to a recovery for Diageo (LSE:DGE) shares.
Burberry reached mid-afternoon 54.5p higher at 1215.5p, in line with the gains of European peers Hermes International SA (EURONEXT:RMS) and Kering SA (EURONEXT:KER) as investors seized on signs of improved China demand.
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LVMH shares settled 12% higher in Paris after the Louis Vuitton and Christian Dior business yesterday posted a forecast-beating 1% uplift in third-quarter sales over a year earlier.
The outperformance after two quarters of contraction was driven by fashion and leather goods, which narrowed its quarterly sales decline to 2% from 9% in the second quarter.
Spending by Chinese consumers was down by low single digits in the division, an improvement from mid-teens in previous months.
Despite the sequential improvement, Chinese luxury spending patterns remain fragile as LVMH said it continued to deal with a disrupted geopolitical and economic backdrop.
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In particular, it highlighted the impact of trade tensions in the US and China on its Hennessy cognac and spirits operation.
The business, which is home to Scottish malt whisky brand Ardbeg, has seen a 12% decline in sales across the first nine months of the year. This is in contrast to a 3% rise for LVMH’s Moet & Chandon champagne and wines operation.
Diageo, whose spirits portfolio includes the brands Talisker, Johnnie Walker and Don Julio tequila, fell 1.5p to stay near a multi-year low of 1,769p following the LVMH update.
The shares will be marked ex-dividend tomorrow before attention turns to the release of a first-quarter trading update alongside the company’s AGM on 6 November.
As we reported last week, Diageo total shareholder return fell by 24% in both of the past two financial years, leaving it 15th in a 16-strong peer group that included Anheuser-Busch InBev SA/NV (EURONEXT:ABI), Procter & Gamble Co (NYSE:PG) and Carlsberg over the three years to 30 June.
The share price decline from April 2022’s 4,000p and shredding of its reputation as a quality stock for the long term has been driven by factors including lower earnings expectations, exposure to a higher US bond yield and tariff risks.
In a note published last week, UBS said that Diageo had the opportunity to accelerate the pace of de-leveraging by generating $5-8 billion from the disposal of non-core operations accounting for 11% of net sales.
The bank, which has a price target of 2,450p, said: “We think Diageo’s improved financial health should help drive a re-rating.”
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In contrast, the turnaround momentum of recently restored FTSE 100 stock Burberry is well established under the leadership of Joshua Schulman.
He launched his Burberry Forward strategic plan last November, with a focus on stabilising the business and repositioning the brand by focusing on outerwear and its British roots.
Shares reached 1,371p in July, up from 654p in April, after a first-quarter trading update revealed a forecast-beating 1% decline in comparable store sales.
Deutsche Bank recently lifted its price target to 1,500p, having seen further signs that the business is reigniting desire in the brand. It said there was scope “for a multi-year re-rating story that could deliver substantial returns by 2030”.
The group, which did not pay a dividend when it reported a loss of £66 million in its annual results in May, is due to report half-year figures on 13 November.
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