Burberry in the red in London; sales growth in the US and Greater China is not enough

(Il Sole 24 Ore Radiocor) - Burberry shares fell on the London Stock Exchange on the day the company announced its first-quarter sales figures: shares dropped by around 5 per cent, bringing the year-to-date decline to almost 20 per cent. The company released an update on its sales for the April–June period. Specifically, revenue, at £455 million, rose by 5% (+4% at constant exchange rates). This performance was driven by a 12 per cent increase in the Americas and a 9 per cent rise in Greater China. Asia-Pacific recorded a 3 per cent increase in like-for-like retail sales, with South Korea continuing to perform strongly, growing by 11 per cent, supported by both local demand and tourist spending. Japan, by contrast, recorded a 2 per cent decline, affected by the ongoing slowdown in tourist numbers from China. The British luxury fashion group also stated that it is targeting revenue growth and margin expansion in the 2026–2027 financial year, in line with expectations, whilst remaining mindful of the uncertainty in the geopolitical and macroeconomic environment and its potential impact on consumer confidence. The company has revised its outlook for wholesale sales upwards, expecting them to grow at a ‘high single-digit’ rate – that is, around 10 per cent – in the first half of the year, compared with the previous forecast of growth of around 5 per cent.

“The retail sector’s performance is almost perfectly in line with market expectations”, commented Bernstein’s analysts, who noted that the company “has successfully completed the first phase of its brand relaunch. Now, however – they concluded – it is up to management to sustain the recovery, adding vigour and momentum’. In any case, Bernstein remains confident and recommends an ‘Outperform’ rating on the shares, with a target price of £1,300. Experts at Jefferies, on the other hand, are more critical; whilst acknowledging that Burberry performed well in its first financial quarter, they have confirmed their ‘Underperform’ rating, setting a target price of £940 – below the current market price. According to Jefferies, Burberry shares “remain vulnerable to the risk of a slowdown in sequential momentum, given the valuation context, which still reflects the long-term promise of double-digit margin recovery”, the analysts explained. Finally, analysts at Barclays are positive, confirming their “Overweight” rating with a target price of £1,410.