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Over the last couple of years the Burberry (LSE: BRBY) share price has been on a huge rollercoaster ride. After losing 79% of its value, and finding itself relegated to the FTSE 250, it finally bottomed last September at 556p. Then, in a few short months the stock doubled in price before losing virtually all of the gains in the tariff-induced sell-off. But progress against the strategy certainly excited investors yesterday (14 May).
Terrible numbers
Of course, before I get too carried away, its full-year results were truly awful. Virtually every important metric was down significantly compared to 2024.
Across the group, comparable store sales growth was negative across all regions. Some of this was outside of its control. For example, visitor spending has never really recovered from the withdrawal of VAT refunds for foreign tourists a few years back. London is now the least competitive destination across European capitals for such shoppers.
Wholesale revenue, an important part of Burberry’s go-to-market strategy, was equally abysmal, slumping 35%. Taken as a whole, the company reported an adjusted operating profit of just 26m, down a whopping 94%.
Cost cutting
Unsurprisingly, after such a poor set of results, the business has targeted draconian cost savings. It expects annualised savings to be around £100m by FY27. The headline-grabber from this is the reduction in headcount by 1,700.
But tied in with the workforce reduction are a number of what I would describe as ‘woolly’ concepts. For example, “streamlining organisational structure to unlock operational efficiencies” together with “evolving ways of working”.
Neither actions come across as particularly revolutionary in approach. No organisation should have too many redundant roles. And teams can’t work with agility if they’re stifled by bureaucratic structures.
Strategy reset
As CEO Joshua Schulman acknowledged, it’s very early days for the company’s refreshed strategy, Burberry Forward. However, I’ve been buoyed by the swift action that he’s taken since taking the reins last July. Many of the strategic actions taken by his two predecessors had seen it moving away from its core outerwear category.
Actions taken to improve in-store experience very much mirror what Marks and Spencer so brilliantly executed recently. A dull store estate will never excite brand desirability
So far, the company has made big changes to enhance visual merchandising in stores. This includes the use of mannequins and improved product densities. I’ve always been of the belief that mannequins provide the simplest way to show the ‘look’ on a person. They’re also a great way to emphasise cross-category merchandising. An improvement in sales in the second half of the year bodes well moving forward
One of the main reasons why I invested in Burberry in the first place was because of its quintessential Britishness. I still contend that there are a lot of far bigger luxury brands that would love to swallow it up into their empires. However, a sustained recovery is unlikely to materialise unless it continues to innovate in traditional outwear.
The road ahead will undoubtedly be bumpy. But with a long history, I remain optimistic about a turnaround and, even a return to the FTSE 100. Since buying more in the recent sell-off, it’s now one of the largest holdings in my portfolio.
