British luxury goods group Burberry (BRBY) strutted in with forecast-beating profits for the year to March 2026 as well as better-than-expected Q4 sales. The trench coats-to-cashmere scarves seller insisted its turnaround strategy has reached a ‘meaningful inflection point’ to boot.
That comment will delight Finsbury Growth & Income Trust’s (FGT) manager Nick Train, who has consistently championed Burberry’s attractions and stuck with the position through thick and thin.
Why then, did shares in the FTSE 100 fashion house drop in in early dealings?
While Burberry expects to deliver revenue growth and margin expansion in FY27, it didn’t give a specific sales target and warned geopolitical and economic uncertainty could hurt consumer confidence.
Investors were also spooked by an expected £10 million foreign exchange headwind on FY27 revenue and adjusted operating profit.
Welcome return to growth
Burberry’s Q4 comparable store sales rose 5%, ahead of the 4.6% analysts were looking for. Double-digit growth in both Greater China and the Americas demonstrated Burberry’s refocus on its British heritage and core categories is resonating with customers in major markets.
However, Q4 EMEIA sales were down 2% amid a slowdown in regional tourist activity, not helped by the impact of the Middle East conflict.
Comparable sales returned to growth from Q2 onwards, with momentum strengthening through the year. FY26 comparable sales rose 2% compared with a 12% decline in FY25, while adjusted operating profit recovered from £26 million to a forecast-beating £160 million.
Global growth opportunities
CEO Joshua Schulman said: ‘Our strategy is working and there are clear opportunities for further growth. As we look ahead, while mindful of the uncertain macroeconomic environment, our focus is on disciplined execution of Burberry Forward.
‘With increased brand relevance and product authority, I am more confident than ever that Burberry is firmly positioned for long-term value creation.’
Weaving a better story
Chris Beauchamp, chief market analyst at investing platform IG, said: ‘The good numbers come thick and fast in Burberry’s update today, especially on the margin expansion front, and make a delightful change from the litany of bad news that seems to populate a lot of UK RNSs at present.’
However, Freetrade’s Duncan Ferris pointed out that Burberry still faces the same challenges impacting the luxury sector, ‘including uncertain consumer confidence and geopolitical upheaval’.
Ferris also observed that Burberry’s ‘onward guidance reads as more directional than definitive. But further revenue growth and margin expansion make Burberry’s early-stage turnaround feel a little more like the genuine article.’
There’s a compelling recovery underway at the leather goods giant. And Schulman’s focus on Burberry’s signature scarves and trench coats is clearly paying off.
Since taking over as CEO in 2024, Schulman has halted his predecessors’ push to take the brand upmarket, lowering prices to make Burberry accessible and affordable to more shoppers.
It is also encouraging to see Burberry’s margins improving thanks to cost savings and improved inventory discipline. Nevertheless, we wouldn’t be in a rush to own the shares given the potential for the Middle East conflict to crimp luxury spending.
We share Burberry’s concerns over the potential impact of the ‘uncertain geopolitical and macroeconomic environment’ on consumer confidence.
Read the press release here: https://www.burberryplc.com/investors
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