Burberry's Resilience Shines: Sales Decline Narrows, Turnaround Takes Hold

Burberry, the renowned British luxury house, has reported encouraging signs of recovery, with its first-quarter retail sales decline being less than anticipated. The company's shares, which have more than doubled since September, saw an increase of 5% in early London trading following the announcement. This positive shift suggests that the strategic initiatives under CEO Josh Schulman, who took leadership a year ago, are beginning to yield results.

The brand's comparable sales returned to growth in Europe, and trading in the Americas strengthened. While sales in China and the broader Asia region still declined, the rate of decrease was about half of what was observed in the preceding quarter. Schulman expressed confidence in the company's trajectory, citing improvements in comparable sales, strength in key product lines, and enhanced brand appeal. He also noted positive reception for the autumn collection.

Burberry's comparable retail sales experienced a decline of just 1% in the first quarter, ending June 28. This performance surpassed analyst expectations, which had predicted a 3% decrease, and marked an improvement from a 6% fall in the previous quarter. Analysts at Citi pointed out this was the third consecutive quarter of like-for-like improvement since Schulman launched his new strategy last November, hinting at potential positive comparable sales in the current quarter. Despite ongoing macroeconomic and geopolitical pressures, and reduced tourist spending in Europe and Japan, Burberry appears to have performed better than its competitors.

The company's focus on simplification, productivity, and cash flow has helped mitigate the more substantial sales declines seen in prior months. Burberry reported retail revenue of 433 million pounds, reflecting a 6% drop at reported exchange rates and a 2% decline at constant rates for the first fiscal quarter. This compares favorably to double-digit declines recorded last summer, prior to Schulman's appointment. The first-quarter update provides early evidence of Schulman’s strategy being effective, with comparable store sales down 1% compared to a more than 20% drop in the corresponding period last year, showing improvement across all geographical areas.

Schulman stated that Burberry has transitioned from stabilizing the business to actively pursuing its ""Burberry Forward"" growth plan. He acknowledged that the external environment remains challenging and that the transformation is in its early stages but expressed encouragement at the initial progress. Looking to the fiscal year 2025-26, Burberry emphasizes its early stage in the turnaround within an uncertain macroeconomic climate. The company's immediate focus is to build on progress in re-igniting brand desirability to drive revenue growth, with continued investment prioritization in the first half. Burberry aims to improve margins through ongoing efforts in simplification, productivity, and cash flow, confident in its path toward sustainable, profitable growth. UBS analysts highlighted that Burberry is expected to be one of the few luxury brands to show improved sales performance from the previous quarter. The company is also addressing potential impacts from tariffs, and investors will be watching for updates on the group’s expectations, particularly regarding wholesale orders for the second half.