Burberry is still on the move

On Wednesday Burberry, the British trench coat icon, announced a plan to cut 1,700 jobs worldwide, a shock measure that is part of a broader turnaround strategy led by its new CEO, Joshua Schulman. Despite this round of layoffs, the brand is managing to catch its breath: its adjusted operating profit for the year ended March 31 was £26m, more than double the consensus. A small accounting miracle in stormy seas.

It's no secret that Burberry has come a long way... but it's still nowhere. The once prestigious label has suffered several setbacks in recent years, including product casting errors, price increases that have been frowned on, and a slowing luxury market. Joshua Schulman, who took the helm in 2024, has attempted to restore order to the house. The goal is to refocus the brand on its fundamentals—trench coats and scarves—while simplifying distribution and beefing up marketing.

It's a deliberate return back to its roots, but it's still far from bearing fruit. Comparable sales for Q4 (calendar Q1 2025) fell 6%, slightly better than the 7% decline anticipated, while regional performance was underwhelming: down 4% in the Americas and EMEA, and down 9% in Asia-Pacific. This is a complicated geography, which was once one of its driving forces.

"Burberry's recovery is in slow motion," sums up James Grzinic at Jefferies. And quite rightly so: the slight improvement in Q4 did not enable the company to capitalize on the upturn in the previous quarter. Most of the operating profit came from active inventory management, not from renewed commercial momentum.

At Bernstein, analyst Luca Solca is more optimistic, while remaining realistic. He refers to "a slight positive surprise on very low expectations" and stresses that Burberry's real strategic turnaround has not yet begun. We will have to wait until the second half of the 2025 calendar year to measure the real impact of the new artistic direction.

AlphaValue has the same cautious tone, where Jie Zhang notes that the adjusted operating margin came in at 1%, above expectations (0.25%), despite a 15% decline in annual revenue. It's meager, but it's a sign of life.

The group remains very cautious for the financial year 2025-2026. The uncertain geopolitical environment, the fragility of the US consumer – at the heart of the recovery strategy – and the ongoing restructuring of its distribution channels complicate the equation. Burberry expects a double-digit decline in revenue in the first half of the year.

But it's not all doom and gloom. The strategy of refocusing on the brand's DNA seems to make sense, and according to some analysts, the gamble could pay off in the medium term. "The potential for recovery is real, and the current share price offers an acceptable risk/return ratio," Solca says.

Meanwhile, investors have welcomed the performance, with the stock climbing 7% to 885 pence after the announcement. When you're not expecting much, any sign of movement is welcome.