New strategy boosts Burberry shares

Burberry says it wants to refocus on “Britishness” under its new designer Daniel Lee, and aims to raise revenues to £5 billion a year. Chief executive officer Jonathan Akeroyd, formerly of Versace, told investors at the half-year results that the luxury retailer boasts "an extraordinary legacy, a unique British heritage and a very strong platform to build on” and its current focus is “on growth and acceleration.”

Indeed, alongside the results, Burberry announced an ambitious plan to double sales of leather goods, shoes and women's ready to wear and grow its outerwear range by around 50% over the medium term. Additionally, it also intends to grow accessories to more than 50% of group sales in the long term and boost sales densities in its stores by more than 50% to £25,000 per square metre.

Burberry’s new “British look”

“We have a clear plan to achieve this across brand, product and distribution and a very talented designer in Daniel Lee, supported by a passionate team,” said Akeroyd. “I am confident in our ability to deliver our medium-term targets and realise our potential as the modern British luxury brand. I am excited about what we can achieve in pursuit of our long-term ambition to reach £5bn in revenue."

The company aims to roll out its new look to all its stores by the end of 2026. Shares in the retailer rose 2% on Thursday.

Half-year revenues rose 11% to £1.3 billion (from £1.2 billion last year) boosted by favourable currency - however, the increase was just 5% at constant currency rates. Adjusted operating profits rose by 21% to £238 million, boosted by favourable exchange rates. Stripping this out, at constant currency rates the increase reduced to 6%. Pre-tax profits came in at £251 million (£191 million), bolstered by a £19 million windfall from the sale of a property in Boston, while gross margins increased by 80 basis points to 70.1%.

Luxury retailer maintains earnings guidance

Burberry has maintained its earnings guidance to the full-year 2024, remaining “mindful of the challenging macro environment and its potential impact on trading.” Specific risks include the continued Covid-19 related lockdowns in China and looming recessions in Europe and the US. However, management says its new medium-term target is to increase sales to £4 billion at constant currency rates and deliver high-single digit growth and improved margins.

Burberry’s buyback programme

Burberry also began its £400 million share buyback scheme during the half-year, with £180 million returned by the end of September. This increased its net gearing and net debt rose to £496 million from £224 million last year. Free cash inflow also dipped to £88 million from £101 million in the same period last year. The company also hiked the dividend by 42% to 16.5p.

Analysts’ reactions to the new strategy were mixed. Thomas Chauvet at Citigroup said it had “a better balance in terms of product categories” than the previous one presented by former chief executive Marco Gobbetti, and could generate a 30% increase in sales in the year to March 2027. However, analysts at RBC Capital said while they thought it was “sensible”, they had “more belief in [the] £4 billion revenue target.”

At 2,075p, Burberry shares have rebounded well this year after hitting 1611p in April. They are trading near their three-year highs but are still off their five-year highs of 2,362p. A recovery in China could boost the shares further, but it may also be wise to take some profits.

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