Burberry is finally recovering

It would be an understatement to say that Burberry did not have its best year in 2024. And even as the industry watched the former glory of English fashion with growing concern, the brand's latest results have been unexpectedly positive. In fact, the brand saw its shares rise by 17% after reporting better-than-expected quarterly results – a breath of fresh air for CEO Joshua Schulman, who aimed to steer the brand toward more familiar territory and focus on its core strengths. But let’s take it slow, first looking at the numbers, which are still down but far less so than expected. In short, the bleeding seems to have stopped. According to data for the quarter that ended a month ago, on December 28, Burberry reported a 4% drop in comparable sales during the quarter ending in December 2023, significantly outperforming market expectations of a 13% decline. Driving these results were the United States, where sales unexpectedly grew by 4%, helped by the reopening of the New York flagship store during the holiday season. In Asia, sales fell by 9%, but this decline was less severe than expected, while Europe, the Middle East, and Africa also recorded a 2% decline, a figure that still exceeded expectations.

The author of this partial recovery is Joshua Schulman, who took over as CEO in mid-2023 and has led the brand to return to its roots, with an emphasis on Burberry’s most iconic and authentic products: outerwear and accessories. These segments, long associated with the brand’s identity, were the focus of two major campaigns during the quarter, centered on Burberry’s trench coats and scarves but also on a more traditional sense of the brand’s English identity. Schulman also sought to address the damage caused by the attempt to reposition the brand in the ultra-luxury world, which had weakened the brand's identity with overpriced products, focusing on which had completely unbalanced the brand. According to BoF, Schulman also prioritized operational improvements, particularly in inventory management. In November, Burberry announced plans to apply selective discounts to clear warehouses occupied by unsold products. While this move raised concerns about the potential impact on the brand’s prestige, the company maintained control over its strategy. For instance, scarves, excluded from discounts, saw strong demand, demonstrating the enduring appeal of Burberry’s core products. CFO Kate Ferry reassured investors that discounts accounted for less than 2 percentage points of the quarterly performance, emphasizing that it was a tactical measure rather than a long-term practice.

The signs of recovery have earned the approval of analysts, who see the results as an important step in the right direction. Citi, for instance, published a report titled Here Comes the Sun, celebrating the brand’s recovery in sales as well as its own humor. The enthusiasm surrounding Burberry’s results also spread to other luxury brands and groups. Shares of LVMH, Kering, and Moncler also rose, though the release of their upcoming results in the coming days will clarify the direction of their strategies. In any case, it’s pointless to celebrate prematurely: Barclays, for instance, raised doubts about the long-term impact of promotions on the brand’s exclusive image, saying that maintaining a balance between discounts and brand equity will be crucial for the brand. Additionally, there remain issues related to a macroeconomic environment dominated by inflation, geopolitical tensions, and changing consumer spending patterns. Nonetheless, it seems the worst is now behind. After all, it appears that what Burberry needed to recover was, quite simply, to continue doing what it had always done.