Burberry Stems Sales Declines in First Quarter as Schulman's Strategy Takes Hold
— What a difference a year makes.
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Burberry's focus on simplification, productivity and cash flow helped to narrow the double-digit sales declines of past months, with the company reporting 433 million pounds in retail revenue, a 6 percent drop at reported exchange, and a 2 percent decline at constant rates in the first fiscal quarter.
That compares with double-digit declines last summer, when the board brought in chief executive officer Josh Schulman to steady the ship, and initiate a turnaround.
Schulman's approach is working, and investors responded with gusto, sending the share price up more than 6 percent to close at 13.27 pounds on Friday, July 18.
Comparable store sales were down 1 percent compared with 21 percent in the corresponding period last year, with improvement across all regions, and the Americas and EMEIA region showing positive growth.
The Americas region was up 4 percent, followed by EMEIA, or Europe, the Middle East, India and Africa, which rose 1 percent. Greater China was down 5 percent, while Asia-Pacific fell 4 percent in the three months to June 30.
The results outstripped expectations, with analysts projecting a 3 percent decline in comparable store sales.
Deutsche Bank noted that Burberry shares are up 27 percent so far this year, 'significantly outperforming both larger peers [including LVMH and Hermès] and turnaround peers [Kering and Ferragamo].'
The bank added that 'further material growth henceforth will depend largely on the company's ability to replicate the success of its core categories onto noncore segments to drive growth and profitability.'
Citi looked farther ahead, speculating that underlying retail sales 'could turn positive' in the second fiscal quarter for the first time in two years.
The 'execution is on track, with new [fall and spring] collections and a wider pricing architecture delivered to stores over the next three quarters to reignite brand desirability,' Citi said.
Bernstein said 'the sequential improvement in same store sales — against a most difficult environment — suggest that things are starting to work.'
The bank added that it expects further improvements in Burberry's second half 'as the full impact of the new marketing vision will become apparent with the fall collection.' It believes that Burberry also has a 'more realistic pricing approach in leather goods,' which should help fuel growth going forward.
Schulman said that over the past 12 months, Burberry has moved from stabilizing the business to driving Burberry Forward, its growth plan, with confidence.
'The improvement in our first-quarter comparable sales, strength in our core categories, and uptick in brand desirability gives us conviction in the path ahead. Our autumn 2025 collection is being well received by a broad range of luxury customers as it arrives in stores,' he said.
Schulman added: 'Although the external environment remains challenging and we are still in the early stages of our transformation, we are encouraged by the initial progress we are starting to see.'
Looking ahead to the full 2025-26 year, Burberry stressed that it's still in the early stages of the turnaround, which has been taking place in a macroeconomic environment that remains uncertain.
'Our focus this year is to build on the early progress we have made in reigniting brand desire as a key requisite to growing the top line,' the company said, adding that in the first half, it will continue to prioritize investment.
It plans to deliver margin improvement 'with a continued focus on simplification, productivity and cash flow. We remain confident that we are positioning the business for a return to sustainable, profitable growth.'
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