Burberry’s Reentry to the FTSE 100 and the Strength of Its Turnaround Strategy

Burberry’s reentry into the FTSE 100 on September 22, 2025, marks a pivotal moment for the British luxury brand, signaling a resurgence after a year-long absence from the index. This return, driven by a 70% rally in its share price and a market capitalization of £4.6 billion, reflects the early success of CEO Josh Schulman’s turnaround strategy [1]. For investors, the question remains: Is this revival sustainable, and does it position Burberry as a compelling investment in a slowing global luxury market?

A Strategic Reinvention: Heritage, Cost Discipline, and Core Strengths

Schulman’s “Burberry Forward” strategy has centered on refocusing the brand on its heritage and core categories—outerwear and scarves—which have shown stronger performance compared to underperforming lines like handbags [4]. This pivot aligns with a broader industry trend where heritage brands leveraging their iconic status (e.g., LVMH, Hermès) have demonstrated resilience during economic downturns [5]. By emphasizing timeless British luxury and simplifying operations, Burberry has reduced inventory overhangs and streamlined its product offerings, contributing to a moderation in sales declines. In Q1 2026, comparable sales fell by just 1%, far below the 3.7% analysts had anticipated [2].

Cost-cutting measures, including 1,700 job cuts (18% of its global workforce), have also been critical. These actions are projected to generate £80 million in annualized savings by fiscal 2026, improving operational efficiency while preserving brand equity [6]. Schulman’s approach contrasts with competitors like LVMH, which relies on scale and diversification, and Hermès, which prioritizes exclusivity. Burberry’s strategy balances heritage with accessibility, aiming to attract both elite and younger consumers through campaigns like the Highgrove capsule collection and experiential retail initiatives [1].

Macroeconomic Resilience and Consumer Behavior

The luxury sector’s resilience during economic slowdowns hinges on its ability to cater to aspirational demand and maintain pricing power. Historical data shows that heritage brands with strong cultural narratives—such as Hermès and LVMH—tend to outperform during downturns, as ultra-wealthy consumers prioritize exclusivity [5]. Burberry’s recent reputation surge, climbing 53 spots to 37th on RepTrak’s 2025 global Top 100 list, underscores its growing appeal [1]. This aligns with shifting consumer behavior, particularly among Gen Z, who prioritize sustainability and authenticity [3].

However, macroeconomic headwinds persist. Weaker demand in Asia-Pacific, trade tensions, and currency pressures have challenged Burberry’s recovery. Unlike LVMH, which can absorb tariff impacts through pricing adjustments, Burberry’s upmarket shift has yet to fully resonate with core consumers [2]. Analysts caution that while the brand’s focus on outerwear and scarves provides a buffer, its long-term success depends on sustaining innovation and adapting to regional market dynamics.

Investment Appeal: A Tale of Two Markets

Burberry’s reentry into the FTSE 100 is likely to attract passive fund inflows, as index inclusion often boosts liquidity and visibility [1]. For active investors, the stock’s 27% gain in 2025 reflects optimism about its turnaround, though valuations remain cautious given the brand’s early-stage recovery [2]. Comparisons to LVMH and Hermès highlight both opportunities and risks: LVMH’s diversified portfolio and Hermès’s pricing power offer superior resilience, while Burberry’s niche focus on heritage and accessibility could carve out a unique growth path.

Conclusion: A Calculated Bet on Heritage and Adaptability

Burberry’s reentry to the FTSE 100 is a testament to Schulman’s ability to stabilize the brand amid a challenging macroeconomic environment. While its turnaround remains in the early stages, the combination of heritage-driven marketing, cost discipline, and a refocused product strategy positions it to compete in a sector dominated by larger players. For investors, the key risks lie in macroeconomic volatility and the sustainability of consumer demand in key markets. However, Burberry’s unique blend of tradition and innovation—coupled with its improved reputation and financial discipline—suggests a compelling long-term investment opportunity, particularly for those willing to bet on the enduring allure of British luxury.

Source:
[1] Burberry to Reclaim FTSE 100 Spot in Quarterly Index Shuffle [https://money.usnews.com/investing/news/articles/2025-09-03/burberry-to-reclaim-ftse-100-spot-in-quarterly-index-shuffle]
[2] Burberry Sales Fall Less Than Feared as Turnaround Takes Shape [https://sg.finance.yahoo.com/news/burberry-sales-fall-less-feared-224500870.html]
[3] The Alchemy of Luxury: Where Gen Z Fuses Sustainability [https://www.kantar.com/inspiration/sustainability/the-alchemy-of-luxury-where-gen-z-fuses-sustainability-storytelling-and-self-image]
[4] Burberry’s Reputation Hits Historic High, Signaling a Turnaround [https://www.forbes.com/sites/pamdanziger/2025/05/29/burberrys-reputation-hits-historic-high-signaling-a-turnaround-and-rising-sales-ahead/]
[5] Is Luxury Recession-Proof? [https://www.businessoffashion.com/opinions/luxury/is-luxury-recession-proof/]
[6] Burberry to Cut Nearly 20% of Jobs as Luxury Sales Sag [https://www.nytimes.com/2025/05/14/business/burberry-job-cuts.html]