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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Luxury lore holds that, once a brand has lost its mojo, it is very hard to make it desirable again. And luring customers back into the store is all the more challenging when economies are slowing and there is less money to throw around.
By that logic, Burberry’s turnaround ambitions should be a long shot. We are clearly in a bleak luxury environment — as evidenced by LVMH’s sales. Yet unlike other would-be recovery plays — see Gucci parent Kering — the British purveyor of posh raincoats is relatively well positioned. Tuesday’s results, which drove the stock up 18 per cent, highlight the reasons why.
The main thing is that, despite endlessly fiddling around with its brand, Burberry still seems to stand for something in consumers’ minds. Its “heritage” is inextricably tied up with Britishness — of the solid breakfast, Savile Row, Kate Winslet caught in the rain variety.
Compared with Gucci, which has by turns embraced outlandish design and quiet luxury, that puts Burberry in the enviable position of not needing to build awareness. Simply binning some of its racier fashion ideas — as newish chief executive Joshua Schulman, who joined in July 2024 from Michael Kors is doing — can staunch losses.
For evidence, take a look at the group’s sales trajectory. A 5 per cent decline in comparable retail revenue over the past six months may not immediately look like a win. But that is a whole lot better than the 20 per cent fall the group suffered in the previous six months.
What’s more, Burberry seems to have weathered the post-Christmas luxury slump better than peers. Sales in the first quarter of the year were sequentially less dismal than the industry’s overall 5 percentage point decline, according to Deutsche Bank analysis. That is not what one would expect. Strapped customers tend to focus their purchases on hot brands, rather than those going through a revamp. So it looks like Burberry’s strategy of repositioning itself as an expensive but not extortionate outerwear provider may be starting to bear fruit.
The second reason Burberry looks increasingly alluring is that it comes, relatively speaking, cheap. The group is trading at 1.8 times 2026 sales, on S&P Capital IQ estimates, compared with Kering on 2.5. Imagine that Burberry managed its goal of returning to £3bn of revenues, 20 per cent higher than where it is now, and roughly its size in 2023, and an operating margin in the high teens. It would then be trading on about nine times operating profit, about half LVMH’s valuation.
With so much in luxury coming down to the “je ne sais quoi”, ineffable qualities that spell the difference between bang on trend or yesterday’s news, it is hard to bet on the shape of things to come. But Burberry is worth trying on for size.
