The announcement of cuts
.The British brand's restructuring will continue for the foreseeable future in the context of a broader crisis that is plaguing the luxury sector. Burberry has in fact announced plans to make further savings of£60 million over the next two years with cuts to the company's global workforce. In detail, the group plans to make around 1,700 redundancies globally, which will be part of organisational changes aimed at improving efficiency and profitability. These savings are in addition to the group's previously announced £40 million cost-cutting programme.
Burberry currently employs over 9,000 people globally. The company said it is still in the early stages of its turnaround and warned that the macroeconomic environment has become more uncertain due to the current geopolitical scenario. The group remains focused on increasing sales, promoting the brand and improving margins. "We expect that the impact of our actions will increase as the year progresses," said CEO Joshua Schulman, who took office last July and promised to revive a struggling brand, which has been penalised by the drop in consumption linked to the cost of living crisis. The group has focused on relaunching its outerwear line, including the famous trench coat, priced at around £2,000.
The analysts' comment
.The figures slightly exceeded low market expectations: comparable retail sales fell by 6%, compared to the consensus estimate of a 7% drop, while adjusted EBIT came in at £26m, against a consensus estimate of £11m.
"We believe that the market can interpret these results as an encouraging sign. However, Burberry's 'new direction' has yet to materialise: the new CEO took office just before the Spring/Summer 2025 show, and we expect the real change of pace to manifest itself only from the second half of calendar 2025," writes Bernstein's Luca Solca, adding: "We had anticipated a few difficult quarters, and this represents another one that we are leaving behind. We believe the new vision and strategy for the brand is consistent, and at current price levels and multiples, we view Burberry as an opportunity with an attractive risk-return profile for a turnaround-oriented long exposure." Bernstein has an 'outperform' rating on the stock.
Analysts at Morgan Stanley raised Burberry's target price to 875 pence from 825, with an 'equalweight' rating. Barclays (underweight with tp at 720 pence) points out that Ebit was better than expected and that there are further savings to come. "The company said it expects the first half of the fiscal year to be particularly challenging, while the benefits of the strategic initiatives undertaken should begin to manifest themselves in the second half. For the wholesale channel, revenues are expected to contract by around 25 per cent in the first half of the financial year as a result of increased rationalisation and control of distribution," Barclays analysts write, continuing, "Based on exchange rates in effect on 25 April 2024, Burberry now expects a negative currency impact of around £30m on revenues and £20m on adjusted operating profit for fiscal 2025." The UK bank's analysts go on to note: "In light of the divergent outlook between the first and second half, it remains difficult to assess whether FY25 adjusted operating profit will be an improvement on the prior year", while on revenues, "the group has already reported weakness in the wholesale channel in the first half, but caution also remains on the performance of Retail, and a cautious tone is expected on the current trading environment. In addition, any updates on the Chinese market and consumer reception of the new collections designed by creative director Daniel Lee will be of interest," reads the Barclays report.
