The last year has witnessed remarkable volatility in the Burberry (LSE: BRBY) share price. Bottoming at 556p in September 2024, the stock initially doubled in price only to retrace following the tariff-induced sell-off. However, with positive vibes around progress in the company’s strategy (known as Burberry Forward) lifting investor sentiment, the stock is now heading back into the FTSE 100.
New strategy
Back in July the company reported a lacklustre set of numbers for the first quarter of 2026. Comparable retail sales fell 1% and retail revenue fell 2%. But sometimes the numbers do not tell the entire story. What investors really wanted to understand was the state of progress against its new strategy.
The core of the retailer’s strategy is very simple: to reignite brand desire. Throughout Q1, it launched a series of distinctive marketing campaigns, each geared toward different customer archetypes.
Its High Summer campaign, which saw two models jump off a boat in Burberry swimwear, targeted a younger audience. This was followed by a collaboration with Highgrove, with a much more sophisticated narrative, targeting a more classically-minded customer. Each marketing initiative essentially focused on different elements of Britishness.
Autumn collection
What particularly excited me was the launch of its Autumn 25 collection during the quarter. This is the first complete release under the new Burberry Forward approach. Early signs are promising with the business reporting a significantly higher sell-through than on last year’s collection.
Of course, the business is most associated with outwear and unless its designs can resonate with customers, a sustained recovery is unlikely.
Executing on outwear is first and foremost built on product strategy. For the summer, its Blackpool jacket with a novelty check trim zipper turned out to be a runaway success. It has also been using its Knight Stamp heavily. This appears across many pieces in its collection.
I would expect much more of these type of initiatives as each season’s campaigns come around.
Risks
The new CEO has been very careful not to get too far ahead of himself. Caution remains the name of the game, with the turnaround still very much in its infancy.
The economic backdrop is hardly conducive to a boom in luxury spending. LVMH, the French luxury giant that owns Louis Vuitton, Dior and other labels, has turned to operational efficiencies to offset a decline in top-line growth. Burberry has already announced that it intends to cut 1,700 posts in the UK.
Many of the cost-saving initiatives instigated are expected to deliver benefits in the second half of FY26. But there is only so much fat a business can remove, and no cost-saving initiative is ever going to deliver revenue growth.
Bottom Line
During the peak of the stock’s sell-off there were a lot of rumours around it potentially being swallowed up by a competitor. And I think many luxury conglomerates would be even happier to have a revived Burberry in their portfolios.
Success in investing to me often comes down to taking positions in businesses that others will not touch. Contrarian investing is a risky strategy. But with Burberry’s 170-year history, and with an appetite for it among consumers for luxury likely to grow in the future, I have been buying steadily this year.
