By 9am today (13 November), the Burberry Group (LSE:BRBY) share price was 4% higher. This follows the release of the luxury fashion brand’s results for the 26 weeks ended 27 September (H1 26).
In normal times, I don’t think the market would have reacted as it did today. After all, its comparable stores sales were flat during H1 26 compared to the 26 weeks ended 28 September 2024 (H1 25). However, these things are relative. This time last year, it reported a 20% reduction.
But delve a little deeper and there appears to be some more positive news. During the second quarter, they were up 2%. It’s the first time this metric has gone in the right direction for two years. The bounceback in China was particularly strong. In the first quarter, like-for-like store sales fell 5% but they were up 3% in the second.
Investors appear to have seen enough to believe that a recovery is underway. And some clues suggesting that the group’s turnaround strategy is working have been around for a while now.
In the second quarter, Burberry re-entered the Lyst Index at number 17 in the top 30 “hottest” fashion brands. During the three months to September, it rose another four places. The list isn’t just one person’s opinion on what’s currently trendy. Instead, it’s compiled using the “largest data set in fashion”, which takes into account online searches, product views and social media engagement statistics.
This comes after a largely positive reaction by the industry’s press to the group’s Spring/Summer 2026 collection.
Reasons to be cautious
However, despite this morning’s share price jump, I think it’s a little too early to say that Burberry’s out of the woods just yet.
Its H1 26 adjusted operating profit was only £19m and it reported a free cash outflow of £50m. Across all four divisions – accessories, men, women and children – its retail/wholesale revenue was lower in H1 26 than in H1 25. The group hasn’t given a breakdown by quarter.
And the group describes the current macroeconomic environment as “uncertain”. Although the Chinese economy is growing, there are signs that the pace of increase is slowing.
Unsurprisingly, the group hasn’t said when (or if) its dividend is likely to be reinstated. No doubt this will disappoint income investors.
But the group isn’t complacent. It acknowledges that it’s “still early days and there is more to do”.
On the other hand…
But what impressed me most with the interim results was that the group was able to improve its gross profit margin by 4.5 percentage points. Remember, this is against a backdrop of a squeezed incomes, higher tariffs on its US imports and persistent supply-chain inflation. This tells me that the Burberry brand remains strong.
And if this continues, this should help the group’s recent share price rally to continue. Looking back six months and one year, its risen 58% and 80% respectively. However, it remains 47% lower than its April 2023 level.
But I reckon there’s plenty of scope for further shareholder value to be added. If the brand continues on its current path, I see no reason why it cannot return to these levels.
On this basis, I think Burberry’s a stock worthy of further consideration.
