"The best-performing fashion names are those that display a consistent brand expression over time," said Joshua Schulman, tasked with reviving Burberry since his arrival in summer 2024. This consistency is precisely what the British house has lacked in recent years, even though its honesty is to be commended.

Burberry is still looking for its identity. After diluting its exclusive image by chasing volume to the point of appearing in unglamorous outlets, the group attempted a sharp pivot in the opposite direction, although this was perhaps made too hastily. Less equipped than the major high-end players, whose lines tend to be more resilient to economic cycles, Burberry bore the full brunt of the luxury downturn. Its exposure to Chinese consumers (close to 40%), also weighed heavily in a market that has become a shadow of its former self.

According to Berenberg, at the end of 2023, 30% of Burberry handbags were priced above £2,000. Today, this price range represents only 2% of the catalog. The Financial Times rightly points out that during the same period, Coach (Tapestry) and Burberry had comparable market capitalizations. The American group's valuation is now nearly seven times higher, bolstered by its positioning in high-margin handbags and more reasonable pricing.

The comparison with Ralph Lauren is also telling. Its share price had stagnated for a decade before regaining strong momentum just as the golden age of luxury began to fade. Its pricing strategy, positioned just below European ultra-luxury, allowed it to become clear once again to both investors and customers.

These examples are far from incidental. Joshua Schulman himself has expressed a desire to position Burberry halfway between American accessible luxury and European high-end. Indeed, there is undoubtedly a niche to be filled. However, the market has already begun to price in this promise, with the share price doubling from its lows of 18 months ago.

Are things picking up?

After FY 2023 revenue reached £3.1bn, followed by nearly £3bn in 2024, Burberry's sales fell below £2.5bn last year, with it posting a loss at the bottom line. This year, revenues are stabilizing and margins are showing signs of recovery.

Its goss margin improved by 540bp to 67.9%, driven by better sales quality and the effects of the inventory reset initiated in FY 2025. Free cash flow more than doubled to £141m. Adjusted operating profit jumped to £160m, compared to £26m a year earlier, pushing the adjusted operating margin back up to 6.6% from just 1%. It's not yet time to get the champagne out though, although a turnaround seems to have appeared.

The turnaround has been built quarter by quarter, culminating in a 5% increase in comparable store sales in the final quarter. In the two markets Burberry could not afford to miss - China and the Americas - growth even reached 10% over the period. The brand's historical core is also showing encouraging signs, with scarves and outerwear recording double-digit growth in H2.

These positive signals must, however, be put into perspective. The comparison bases for the aforementioned trends are so low for a brand like Burberry that the market's mixed reaction is completely ' understandable. In comparison, Prada, Moncler and Ralph Lauren's operating margins reach 23.2%, 29.2% and 14% respectively.

The stock is trading at valuation levels that may seem attractive given the potential for margin recovery. EV/Sales, as well as EV/EBITDA, remain slightly below the peer average. The publication is therefore reassuring in several respects, although many questions remain regarding the actual effectiveness of the group's strategy.

The easiest part is done. Burberry has refocused its narrative on its DNA, relaunched its flagship products, and regained momentum in several key regions. The hardest part begins now. The market will follow once the brand has confirmed its recovery in Europe and the rest of Asia, and once it has proven its ability to grow in segments less natural to it, such as leather goods.