Burberry shares hit intraday highs as strategy overhaul marks turning point

LONDON – Burberry aiming to win back buyers and boost reduced sales by refocusing on heritage design and statement pieces in sweeping revamp plans designed to revive the luxury fashion house’s ill fortune.

“Burberry Forward” strategic overhaul, announced on Friday, intends to reconnect the brand with the “original purpose” while taking a more disciplined approach to product selection, with a focus on its staple coat and scarves, the company said.

The stock jumped more than 22% on the announcement, for its biggest intraday gain. Shares were last seen up 17% at 15:34 pm London time. The stock is down about 39% year-to-date.

Analysts reacted positively to the news, pointing to a potential “turning point” for the beaten-down brand.

The plan provides the first insight into Burberry’s repositioning under new CEO Joshua Schulman, who joined in July from Michael Kors, becoming the brand’s fourth CEO in the last decade.

“Today, we are acting quickly to correct, stabilize the business and position Burberry to return to sustainable and profitable growth,” Schulman said in a statement.

Schulman says the brand has moved away from its core product over the years, distancing itself from consumers and focusing too much on specialty products rather than legacy items. He also notes that the brand’s “elevation strategy” has caused prices, especially in leather goods, to be out of line with its market position.

“Now, we have a clear framework to re-ignite the brand’s desire, improve performance and drive long-term value creation. Building on a strong foundation, I am confident that Burberry’s best days are ahead” he added.

The plan was delivered alongside Burberry’s 2024 interim results, which saw sales fall 20% for the second quarter in a row.

The underperformance comes amid a slowdown in the luxury sector, with the private luxury goods market set to contract 2% this year. However, analysts have long pointed to the inherent failure of the company, with successful CEOs trying unsuccessfully to revive the brand and raise its image.

Piral Dadhania, an analyst at RBC Capital Markets, said Thursday’s improvement plan was long overdue and should allow the brand to address its strongest areas.

“The focus on heritage and outerwear is what we have been waiting for in terms of strategy because it offers more authenticity in a less competitive category in our view,” Dadhania said in a note.

Mamta Valechha, consumer discretionary analyst at Quilter Cheviot, described it as “a turning point in a very difficult time.”

Citi’s head of luxury goods equity research, Thomas Chauvet, said he expected “significant changes” in terms of product design, assortment, pricing architecture, distribution and communication – all while not moving away from the global luxury brand’s position.

The shift in strategy follows speculation that Schulman will adopt a ‘British Coach’ strategy, using methods from his former employer to target more aspirational consumers. These methods may include doubling down on stores and increasing exposure to off-price retailers.

Yanmei Tang, analyst at Third Bridge, welcomed the shift to high-end luxury there, but said that the success of the overall strategy will depend heavily on Schulman’s ability to align his vision with that of the company’s designers.

“Burberry can take inspiration from brands like Louis Vuitton by balancing high-end artistic collections with accessible core items, keeping the British heritage at the forefront. The success of this strategy will depend on the alignment between Schulman’s business acumen and Lee’s creative vision,” she said.

Bernstein upgraded its rating to better late last month, saying the company “remains on the right track” following Schulman’s appointment. HSBC followed soon after.