Burberry's Turnaround Strategy: A Bullish Bet on Luxury's Comeback

Amid a challenging luxury market, Burberry (BRBY.L) is positioning itself for a resurgence through its "Burberry Forward" strategy, a bold realignment focused on heritage, cost discipline, and regional recovery. Recent sales stabilization signals, coupled with tariff de-escalation and analyst upgrades, suggest this could be the inflection point for the iconic British brand. Here’s why investors should take notice now.

Sales Stabilization: A Turning Point in the Luxury Slump

Burberry’s fourth-quarter FY25 (ended March 2025) comparable retail sales declined 7% year-over-year (YoY)—a marked improvement from the prior quarter’s 15% drop. This narrowing gap signals stabilization in a sector still grappling with geopolitical tensions and shifting consumer preferences. While Asia Pacific remains weak (down 23% YoY), the Americas region showed early recovery, with sales down just 23%—a better-than-expected result.

The key driver? The "Burberry Forward" strategy, launched in November 2024, which prioritizes core heritage categories like outerwear and scarves. These products, which outperformed the group average in FY24, now anchor the brand’s comeback. As CEO Joshua Schulman emphasized, this pivot to timeless British craftsmanship has reignited demand among conservative luxury buyers.

Cost Cuts and Strategic Retail Optimization: A Foundation for Profitability

Burberry is aggressively trimming fat. Its £50 million annual cost-saving program—including store closures and supply chain reconfiguration—is already bearing fruit. By shuttering underperforming locations and renovating flagships (e.g., its London Bond Street store), the brand is focusing resources on high-impact markets.

Meanwhile, the suspension of FY25 dividends has bolstered liquidity, a critical move as the company navigates a £50 million pre-tax loss for FY25. While painful, this prioritization of recovery over short-term returns aligns with investor demands for long-term stability.

Tariff De-Escalation: A Tailwind for Asian Markets

The recent de-escalation of U.S.-China trade tariffs—a major overhang for luxury goods—provides a timely boost. Burberry’s Asia Pacific sales, which plunged 23% YoY in FY25, could see relief as tariff-related price pressures ease. Japan’s 6% sales growth in Q1 FY25 hints at the potential for broader regional recovery if macroeconomic conditions improve.

Analyst Upgrades and Technical Catalysts: The Case for a Rebound

The investment community is taking notice. Citi recently upgraded Burberry to "Buy" for the first time since 2008, citing its strategic realignment and the "Burberry Forward" execution. While the stock remains 16% below its May 2025 highs, its 30% rebound from September 2024 lows signals renewed investor confidence.

Key technical levels to watch:
- Resistance: £0.84 (200-day moving average) and £0.92 (pre-tariff peak).
- Support: £0.72 (2024 low).

A sustained close above £0.84 could unlock further gains, particularly if FY25 results beat low expectations.

Why Act Now?

1. Valuation: At 7.5x FY26E EV/EBITDA, Burberry trades at a discount to peers like Prada (10.2x) and Kering (9.8x), reflecting its turnaround risks. But with a path to £3 billion revenue and high teens operating margins by FY27, this could be a bargain.
2. Near-Term Catalyst: The upcoming FY25 results (due May 14, 2025) will test management’s execution. A better-than-expected Q4 print or FY26 guidance could spark a rerating.
3. Long-Term Bet: The luxury sector remains a growth engine, with global demand projected to hit €400 billion by 2030. Burberry’s heritage-driven relaunch positions it to capture this upside.

Risks to Consider

• Asia Pacific Recovery Lag: China’s economic slowdown could prolong weakness in the region.
• Competitor Pressure: Rivals like LVMH and Prada are outpacing Burberry’s innovation.
• FX Headwinds: A strong pound could dampen export sales.

Final Analysis: A High-Reward Opportunity

Burberry’s "Burberry Forward" strategy is no longer theoretical—it’s showing early wins in sales stabilization, cost control, and brand repositioning. While risks linger, the stock’s valuation, strategic clarity, and upcoming catalysts make it a compelling bullish call for investors willing to bet on luxury’s next chapter.

Action to Take: Buy shares of Burberry (BRBY.L) at current levels, with a target of £0.92 (a 17% upside from May 13, 2025 prices). Set a stop-loss below £0.72 to manage risk.

The luxury sector’s next comeback story is writing itself. Don’t miss the train.

Data as of May 13, 2025. Past performance is not indicative of future results. Consult a financial advisor before making investment decisions.