A series of operational issues have put Burberry (LSE:BRBY) shares through the mill in recent years. It means someone who invested 10 years ago — back when the business was still listed on the FTSE 100 — would be nursing a nasty loss.
Had an investor put £10,000 in the now-FTSE 250 business on 14 May 2015, they would now have £5,528 sitting in their investment account. That represents a loss of 44.7%.
Thankfully, a stream of dividends during that time (excluding pandemic-hit 2020) would have taken the edge off. For the last 10 years, Burberry has delivered a total dividend of 408p per share.
This means a £10k investment a decade ago would have provided a total return of £7,841 or -21.6%.
But could the fashion giant be about to turn the corner and deliver solid returns looking ahead? Judging by Burberry’s share price surge on Wednesday (14 May), the broader market suggests the answer could be ‘yes.’
Another poor update
The FTSE 250 company is currently up almost 18% from Tuesday’s close, at 975p per share. This is despite it reporting another whopping sales drop for the last financial year (to March 2025).
At £2.5bn, revenues tanked 17% on a reported basis, or 15% at constant currencies. Comparable store sales plummeted across its regions, causing a 12% year-on-year fall at group level.
Trading was especially weak in Asia, where corresponding sales dipped 16%.
As a consequence, adjusted operating profit tanked 94% at actual exchange rates and 88% at constant currencies, to £26m. The business also swung to a pre-tax loss of £66m from a £383m profit the year before.
The company wasn’t exactly brimming with confidence for the current financial year, either. It stated that “the current macroeconomic environment has become more uncertain in light of geopolitical developments“.
It added that “we are still in the early stages of our turnaround“, and that its focus for fiscal 2026 “will be to build on the early progress we have made in reigniting brand desire, as a key requisite to growing the topline“.
Burberry predicted that margins will improve as plans to improve productivity and simplify the business continue.
Is it a buy?
So why has the firm’s share price surged, then? It’s chiefly down to better-than-expected sales towards the year’s end, which investors believe may show progress under its ‘Burberry Forward’ turnaround strategy.
Comparable store sales dropped 6% in the fourth quarter, but this still beat forecasts by around 2%. The company hopes measures like emphasising the Britishness of its brand; emphasising key outerwear lines; and accelerating cost savings will get it back on track.
But Burberry has a long way to go before it can prove any recovery is sustainable. And I feel the optimism that’s sent its share price through the roof is greatly premature.
The luxury goods market remains under substantial pressure as consumers dial back spending. And while tariff talk has died down for now, any fresh developments could keep shoppers’ purse strings tightened. Burberry is especially exposed to worsening trade wars as well given its huge reliance on China.
On top of this, Burberry operates in an unforgiving industry where competition among superbrands is intense. I’ll want to see more progress on the company’s brand and product strategy before buying in.
