Company Reports

Burberry delivered 4% constant-currency retail sales growth in the first quarter, driven by 5% in comparable retail sales. Comparable sales matched those delivered in the fourth quarter. Despite matching the company's compiled consensus, Burberry shares were down 6% at the time of writing.

Burberry Group has transformed from an essentially licensed/wholesale business model with inconsistent regional product and brand presentation into a strong monobrand luxury player with a consistent message, good control over distribution, and a global presence.

Burberry reported flat revenue at constant currency in fiscal 2025-26 and retail comparable sales up 2%. It swung back to profits on a reported basis and delivered 6.6% adjusted operating margin.

Luxury sector shares were down by 1%-7% on March 2 following the US and Israeli attacks on Iran and Iran's retaliatory attacks on Israel and US bases across the Middle East (United Arab Emirates, Saudi Arabia, Qatar, Kuwait, and Bahrain).

Burberry reported 3% growth in comparable sales in third-quarter fiscal 2026, a slight sequential improvement from 2% recorded in the second quarter. An improvement in Asia-Pacific, and specifically China, drove performance.

Burberry Group has transformed from an essentially licensed/wholesale business model with inconsistent regional product and brand presentation into a strong monobrand luxury player with a consistent message, good control over distribution, and a global presence.

Burberry reported slightly better-than-consensus revenue and profit in the first half of the year. Notably, like-for-like sales returned to growth with 2% in the second quarter. Those were down 1% in the first quarter. Company-compiled consensus expectations were for 1% growth.

Burberry continued to show sequential improvement in retail revenue trends in the fiscal first quarter, as the comparable sales drop was limited to 1% (down 6% in the fourth quarter). The stock is up more than 3%, reacting positively to the results.

Burberry Group has transformed from an essentially licensed/wholesale business model with inconsistent regional product and brand presentation into a strong monobrand luxury player with a consistent message, good control over distribution, and a global presence.

Burberry reported expected weak profitability and a 15% drop in constant-currency revenue for full-year 2024/25. However, the second half showed improving revenue trends. Shares were up about 9% on the day of the announcement.

We are maintaining our fair value estimates for stocks in our luxury coverage following the announcement of reciprocal tariffs by US President Donald Trump. Tariffs of 20% on the European Union, 10% on the UK, and 31% on imports from Switzerland are having the most impact on our coverage (as well as 36% tariffs on Thailand for Pandora, where most of its manufacturing takes place). Americans account for around 30% of global luxury consumption and sales exposures in the Americas for companies under our coverage range from the midteens to high 30s. Moncler, Prada, and Swatch are least exposed; EssilorLuxottica, Brunello Cucinelli, and Pandora are most exposed.

Narrow-moat Burberry released its third-quarter fiscal 2025 trading update, showing stabilization after significant sales declines in the first half of fiscal 2025. Retail sales fell by 4% year over year, a marked improvement from the 12%-20% declines seen over the previous three quarters. The company is streamlining its strategy, focusing on its core outerwear and scarves categories, which delivered low-single-digit and low-teens growth, respectively, supported by successful marketing campaigns and strong festive season sales. The market reacted positively to the update with the share price jumping 14% on Jan. 24 and achieving a 23% year-to-date gain. We maintain our fair value estimate of GBX 1,330 per share and see around 10% upside at current valuation levels.

We maintain our fair value estimate for narrow-moat Burberry as it announced weak first-half results and provided some insights into its turnaround plan. Shares are trading in 5-star territory with 80% upside to our fair value estimate. Although it's a challenging task to execute a turnaround amid tough macroeconomic conditions, we are positive about the strategy and its early implementation while the valuation remains undemanding.

We are reducing our fair value estimate for narrow-moat Burberry to GBX 1,330 per share from GBX 1,570 to reflect weaker expectations for the current year following a disappointing first quarter, as well as a slower longer-term recovery in sales. We still see value in the shares. The luxury sector is going through one of its downcycles, which historically haven't persisted for longer than one or two years, so we still see potential for Burberry to recover brand momentum.

Burberry Group has transformed from an essentially licensed/wholesale business model with inconsistent regional product and brand presentation into a strong monobrand luxury player with a consistent message, good control over distribution, and a global presence.

Burberry Group has transformed from an essentially licensed/wholesale business model with inconsistent regional product and brand presentation into a strong monobrand luxury player with a consistent message, good control over distribution, and a global presence.

We are reducing our fair value estimate for narrow-moat Burberry to GBX 1,680 from GBX 2,100 as the company reported a decline in revenue and profits for fiscal 2023/24. While full-year revenue and profits were modestly below our estimates, we factor in our reduced expectations for the recovery of brand appeal, given that Daniel Lee’s appointment failed to improve performance after 18 months in the chief creative officer role as well as a more challenging industry backdrop in the current year. Shares remain undervalued.

Burberry Group has transformed from an essentially licensed/wholesale business model with inconsistent regional product and brand presentation into a strong monobrand luxury player with a consistent message, good control over distribution, and a global presence.

We are reducing our fair value estimate for narrow-moat Burberry to GBX 2,100 from GBX 2,460 as the company significantly reduced its full-year profitability outlook for the financial year ending March 2024. Operating profit is now expected to be within the range of GBP 410 million-GBP 460 million, down from the lower end of GBP 550 million guidance communicated in November 2023 with its first-half 2023/24 results, implying a 20% downgrade at the midpoint. We still view shares as cheap at current levels.