Burberry’s Turnaround Efforts Show Promise Amid Uncertain Economic Environment

Burberry, the iconic British luxury outerwear maker, has marked a significant milestone in its turnaround efforts, citing a ‘meaningful inflection point’ in its fiscal year performance. Despite a weaker performance in Europe and the Middle East, the company reported a 2% growth in comparable sales over the fiscal year, driven by a 10% increase in the Americas and China in the quarter ended March.

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The growth in the Americas and China was largely offset by a decline in European sales, which Burberry attributed to reduced tourist flow to the region due to the ongoing conflict in the Middle East. The company’s CFO, Kate Ferry, declined to comment on trading in April and May, given the current macroeconomic situation.

Analysts praised Burberry’s efforts to return to its core British heritage brand, including trench coats and scarves, and increased marketing spend. Citi analysts noted that the company has made significant strides in its turnaround efforts, with three consecutive quarters of improvement. Burberry is ahead of many of its peers in its efforts to return to growth after several difficult years for the luxury sector.

CEO Joshua Schulman, who took the reins in July 2024, has set out a target of £3 billion in annual revenue as part of its long-term strategy, ‘Burberry Forward.’ The company reported fiscal 2026 revenue of £2.4 billion ($3.25 million), largely in line with expectations at constant exchange rates. Adjusted operating profit came in at £160 million, up from £26 million a year ago.

Burberry said it was ‘mindful of the uncertain geopolitical and macro-economic environment and its potential impact on consumer confidence.’ However, the company expects to make further progress on its financial ambitions in 2027. The conflict in the Middle East has hit many of Burberry’s peers hard, with LVMH, Kering, and Hermes disappointing investors with earnings misses last month.

The region typically accounts for mid-single-digit sales for major luxury brands, but had been a bright spot in a sector that experienced largely sluggish growth elsewhere. Burberry’s comparable sales in EMEA and India declined 2% due to reduced tourism in the region and the Middle East conflict towards the end of the quarter.

Burberry’s solid end to the fiscal year was expected by analysts, who attributed the 4% profitability beat to the company’s cost-saving program and gross margin expansion. However, the stock slipped 6.84% by 11.21 a.m. in London (6:21 a.m. ET) as investors had likely wanted more.

The company’s efforts to return to growth are paying off, with a strong fourth quarter driven by momentum in Greater China and the Americas. CEO Schulman said, ‘Our strategy is working, and there are clear opportunities for further growth.’ Burberry is well-positioned to capitalize on the growing demand for luxury goods in the Americas and China, despite the challenges posed by the conflict in the Middle East.