ii view: will Burberry's recovery make stock more fashionable?

First-half results to 27 September

• Currency adjusted revenue down 3% to £1.03 billion
• Adjusted operating profit of £19 million, improved from a loss of £41 million
• Gross profit margin up 4.1% to 67.9%
• No dividend payment  
• Net debt including lease liabilities down 23% to £1.09 billion

Guidance:

• Continues to expect further profit margin improvement for the current 2026 full year

Chief executive Joshua Schulman said:

"One year into Burberry Forward, my belief in this extraordinary British luxury house is stronger than ever.  With the consistency of our Timeless British Luxury brand expression and an improved product offer, we have begun to see customers return to the brand they love, resulting in comparable store sales growth for the first time in two years. 

“While it is still early days and there is more to do, we now have proof points that Burberry Forward is the right strategic path to restore brand relevance and value creation. We move forward with confidence that Burberry's best chapters lie ahead."

• Invest with ii: Top UK Shares | Share Tips & Ideas | Open a Trading Account

ii round-up:

Founded in 1856, Burberry Group (LSE:BRBY) today employs around 8,500 people. 

Competing against rivals such as Ralph Lauren Corp Class A (NYSE:RL) and Hugo Boss AG (XETRA:BOSS), Burberry largely sells clothing products including outwear and leather goods. 

Burberry products are sold on both a retail and wholesale basis, with retail generating just over four-fifths of revenues and wholesale providing most of the balance.

Retail outlets as of late September numbered 225 stores, 136 concessions, 54 outlets and 31 franchised stores.

For a round-up of these latest results announced on 13 November, please click here.

ii view:

Chief executive Joshua Schulman, appointed in July 2024, came to Burberry having worked at companies including Michael Kors, Coach, Jimmy Choo and Gucci. A targeted recovery under its ‘Forward Burberry’ programme now includes ongoing plans to reignite brand desire, rebalance the product offering and re-introduce lower pricing points, as well as cut costs. 

Accessories generated most revenues during this latest period at 34%. That was followed by Women’s items at 31%, Men’s at 30% and Children’s and other the balance of 5%. 

For investors, a mid-single digit retreat in full year wholesale related sales continues to be expected by Burberry. The many factors which sit outside of management’s control such as the UK’s ongoing withdrawal of VAT refunds for overseas visitors and the influence of the weather on demand should not be overlooked. US trade tariffs and a broadly more strained relationship between the West and China now persist, while Burberry’s halted dividend payment contrasts with yields of over 3% for fellow retailers Next (LSE:NXT), Tesco (LSE:TSCO) and Dr. Martens Ordinary Shares (LSE:DOCS).  

• Watch our video: City of London: the UK shares still offering value
• ii view: M&S places cyber-attack firmly in rear-view mirror
• Five top share trades for 2026

On the upside, like-for-like store sales grew across three of its four geographical regions during the latest second quarter with Asia Pacific sales flat compared a 4% retreat in Q1. Management initiatives now include annualised cost savings of £100 million by the full year 2027. A halting of the dividend provides increased spending flexibility, while previous rumours of takeover interest could resurface should Burberry’s recovery derail.  

For now, blossoming management initiatives offer hope. That said, more cautious investors may decide to await firmer evidence of recovery before taking any interest.  

Positives: 

• Renewed strategic focuses
• Product and geographical diversity

Negatives:

• Fashion can be highly fickle
• Currency movements can provide headwinds

The average rating of stock market analysts:

Strong hold