Undergoing transformation

I’m talking about Mulberry Group (LSE:MUL). It’s a British luxury brand best known for designing and selling high-end leather goods, particularly handbags. It has a big focus on its ‘Made in England’ heritage and was a much larger brand a decade ago.

Yet over the past year, the stock has risen by 13%, with it currently at 95p. Despite the company still being loss-making, the rise in the share price reflects growing optimism about the turnaround at the business. In the H1 results from last November, losses narrowed significantly to £6.9m from £15.7m, while gross margins improved to around 69%.

This was thanks to a shift away from discounting and tighter cost control. Operating costs were cut by 16%, and management has been actively closing underperforming stores and streamlining the business. In classic turnaround fashion, the company is becoming leaner, a stance I like to see that typically then leads to profitability further down the line.

There’s also a strategic reset under way. Management is refocusing on Mulberry’s core strength, which I agree is its British heritage. It’s pulling back from weaker international markets and focusing on driving growth in key regions like the UK, Europe and the US. In fact, some channels have already returned to growth, even as the broader luxury market remains soft. And only last week it announced a return to the publicity-generating ready-to-wear segment with headline-grabbing designer Christopher Kane in charge.

Undervalued when looking ahead

With a market cap of £68m, the stock is trading at well under 1x annual sales, which I use as a fair benchmark. The price-to-sales ratio is just 0.58. For comparison, Burberry has a ratio of 1.58. This highlights to me that the stock could be undervalued.

If the company can simply return to modest profitability, the earnings recovery could be significant, and the rating could expand quickly. In other words, the share price is still factoring in a lot of bad news.

But when I look ahead, I actually see plenty of reasons why the company could do well. First, cost savings (targeted efficiencies at around £5.9m annually) should feed directly into margins. Second, even a stabilisation in luxury demand could help, given how weak the recent period has been. And third, the brand still carries intangible value that isn’t fully reflected in the current share price. It’s a classic British brand that I think still resonates with many people.

Of course, there are risks involved. The biggest issue I see is that the business is still loss-making, with negative margins and declining revenues. This ultimately can’t continue if the company is going to survive (and thrive). And its share aren’t very liquid with the vast majority held by controlling shareholder Challice and by Frasers Group. Yet even with this concern, I think it does look good value and could be considered by investors.

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However, more people own a Stocks and Shares ISA. So is there a reason why someone would hold both? Let’s investigate.

A quick comparison

The fundamental difference between the two products is that you can’t touch a SIPP until retirement age whereas it’s possible to access an ISA at any time. This makes the former an effective way of saving for old age as it removes the temptation to withdraw funds for other purposes.

But holding both gives greater flexibility should you need to access some emergency funds. That’s the principal reason why I have one of each. However, there are other differences.

With a SIPP, it’s possible to contribute up to 100% of annual income, subject to a maximum of £60,000. There’s a £20,000 annual contribution limit with a Stocks and Shares ISA.

Both offer some great tax benefits. Capital gains and income can be earned tax-free. However, in addition, contributions to a SIPP attract tax relief.

If in doubt as to which is best, I think it’s worth seeking professional advice.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

A common goal

But whether an individual has a SIPP, an ISA, or both, the objective of building long-term wealth remains the same.

For example, someone investing £250 a month at an annual return of 7% would see their fund grow to £294,016 over 30 years. This ignores any tax relief that would be received with a SIPP.

One of mine

A stock that I hold in my SIPP is Burberry Group (LSE:BRBY).

The luxury fashion group saw its share price slump as post-pandemic inflation and interest rate rises choked off demand. But I think there are early signs that the group’s fortunes could be on the turn. Crucially, its last three collections have been well received by journalists and industry professionals.

And the group’s most recent trading update – for the 13 weeks ended 27 December 2025 – showed a 1% increase in retail revenue compared to a year earlier. Comparable store sales were up 3%. For the second successive quarter, all regions were flat or positive.

This might not sound particularly impressive but it shows an improving trend and is evidence that its ‘Burberry Forward’ turnaround strategy, with its emphasis on the group’s ‘Britishness’ and outerwear, is working. Greater China, a key market, showed 6% like-for-like sales growth compared to 3% during the previous quarter.

We will know more on 14 May, when the group plans to publish its full-year results.

A long-term play

Recent events in the Middle East have severely dented Burberry’s share price. However, assuming the war ends soon, I believe this is a buying opportunity to consider. Yes, the conflict’s a reminder of how another global slowdown would badly affect the group. And a further round of US tariffs would also be unfortunate.

But appropriately for a brand that’s been around since 1856, I plan on holding my Burberry shares for the long term. I believe the group has huge recovery potential although I suspect the stock’s likely to be a bit of a slow burner rather than an overnight sensation.

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The FTSE 100-listed luxury fashion retailer has a lot of explaining to do, given its recent hyper-volatile performance. The shares are down almost 40% over three years, but they’re up 43% in the last 12 months.

Fruity FTSE 100 stock

The plunge began in 2023, as the luxury goods sector struggled across the board, largely due to falling demand from key markets such as China. Profit warnings, falling revenues and slowing retail sales spooked investors. But not me. I saw the trouble as a buying opportunity and dived in, only to find myself sitting on a quickfire 40% loss as the slide continued.

By September 2024, the shares had slumped to a 15-year low, and Burberry was relegated to the FTSE 250. I doggedly stuck with it, and I’m glad I did.

The shares bounced back even faster than I could have imagined, as investors welcomed new CEO Joshua Schulman’s Burberry Forward strategy. This aimed to refocus the brand on its core heritage products, such as outerwear and trench coats, simplify its retail footprint and cut costs.

I thought investors jumped too soon, to be honest, because Schulman hadn’t actually delivered anything yet, just set out the plan. Still, I wasn’t complaining.

And now it appears to be paying off. In November, Burberry reported an increase in quarterly comparable store sales for the first time in two years, helped by a turnaround in China. It posted an adjusted operating profit of £19m in the first half to 27 September, going some way towards reversing a £41m loss a year earlier. Operating margins turned positive at 1.9%, up from a negative 3.8%. They’re still wafer thin though.

JPMorgan subsequently downgraded Burberry from Neutral to Underweight, suggesting consensus forecasts were too optimistic given wider macroeconomic challenges. There hasn’t been much company-specific news around, but the shares have been going bananas as sentiment fills the vacuum. They jumped 4.62% yesterday, but are down 3.38% today (7 January). That’s just one example.

This stock is volatile

Despite their volatility, the general direction of travel is upwards. So should investors sink their teeth into Burberry today?

One thing to note. Burberry publishes its Q3 trading update on 24 January. While we wait, broker RBC remains optimistic. It notes that last year, Burberry was busy clearing excess inventories. That’s largely over now. RBC still rates the stock Outperform and predicts 2% like-for-like sales growth to £658m, led by growth of 3% in Greater China and 2% across the Americas.

RBC’s target price is 1,400p, but that implies a modest rise of around 5% from today’s 1,314p. Consensus forecasts produce a target of just 1,310p, down slightly from today. This backs my own view about Burberry, which is this.

If I didn’t already own Burberry shares, they wouldn’t be my first pick today as progress could get stickier from here. I’m holding, but investors should consider looking elsewhere on the FTSE for the next big recovery play. Maybe something a little less bananas.

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I was down 40% on both at some point in 2025. I was tempted to dump them from my Self-Invested Personal Pension (SIPP), because they were making it look untidy.

Then I remembered the P-word. So I stuck with them, and now my patience is being rewarded, and sooner than I expected. So are they now off the naughty step?

Burberry shares are back

The first stinker is luxury fashion brand Burberry Group (LSE: BRBY), which I bought in May 2024 after a couple of profit warnings hammered its share price. That taught me another lesson. When bad news strikes, wait. Often there’s more bad news around the corner, and that was the case here.

The was a second reason for buying Burberry. As well as recovery potential they offered income, with the yield heading towards 6%. It didn’t last. Burberry scrapped the dividend to focus on its turnaround.

After that double blow, the recovery has been quicker than expected, as investors bought into new CEO Joshua Schulman’s ‘Burberry Forward’ strategy, outlined in November last year. Improving sales in China also helped.

The Burberry share price is now up 35% over the last year. Personally, I’m 18% up. I’d suggest investors approach with caution today, as the stock may have raced slightly ahead of events. But it should do better as the inflation retreats, and consumers come out of their shells. One day, the dividend may even return.

Glencore’s stock is up

I bought mining giant Glencore (LSE: GLEN) in July and September 2023. Again, the shares were down and I thought they looked good value with a price-to-earnings ratio of around five or six, and a 5% yield. And again, I found myself nursing a quick loss.

The bad news kept coming out of China, the key source of demand for metals and minerals production, as its property market and banking sector struggled. Falling US demand didn’t help.

Again, I considered selling, but the natural resources sector is famously cyclical. And then I remembered another lesson hammered home from years writing for The Motley Fool: investing is a long-term game. The underlying business wasn’t going anywhere. Eventually, events would swing in its favour, and investors would return. So it proved.

Glencore is pointing the right way again. It’s up 37% in six months, although the 12-month return is just 10%. I’m currently sitting on a 15% loss, which is still a pain, but dividends reduce that to a marginally more soothing 10% loss.

Next year could be bumpy for both Burberry and Glencore, as the global economy may continue to struggle. While I’m thrilled at their double recovery, I can see better growth and income prospects elsewhere on the FTSE 100, and that’s where my focus will be in 2026. I’ll hold these two, but won’t push my luck by buying more.

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But is this too good to be true?

Falling out of fashion

Like most operating in the luxury goods market, Burberry Group’s (LSE:BRBY) suffering from a difficult retail environment caused by global economic uncertainty.

Despite this, analysts have set a 12-month target that’s 14.9% higher than the group’s current (12 December) share price. I suspect this positive outlook is based on its most recent trading update, which suggested that things could be on the turn or, at the very least, that the worst is now behind it.

But a recovery isn’t guaranteed. There are mixed messages about the performance of the Chinese economy, a key market for the group. Also, operating over 400 stores around the world is logistically challenging.

However, the icon’s latest collection appears to have been well received by journalists and other industry observers. The group also appears to be gaining traction on social media. And we have to remember that Burberry’s brand has proven to be remarkably resilient in recent years. It’s survived far more difficult times before. This gives me confidence that it will emerge from the present downturn in good shape. For this reason, I think it’s one for patient long-term investors to consider. 

Drill, baby, drill!

The performance of the Harbour Energy (LSE:HBR) share price has been a huge disappointment to me. It’s suffered on the back of an extraordinarily high tax rate of 78% levied on its North Sea profit. To compensate, in 2024, it acquired various oil and gas fields in other parts of the world, where taxes are lower. The deal also helped reduce its operating cost per barrel.

But the trouble with energy stocks is that it’s impossible to know with any great accuracy what the oil and gas price will be from one period to another. This means earnings can be volatile. However, even with energy prices at their current relatively low levels, Harbour Energy’s directors are forecasting free cash flow of $1bn in 2025. This means the group should be able to keep to its dividend policy of returning $455m to shareholders. If it can, it implies an impressive current yield of 9.8%.

Such high returns should be treated with caution. But in this case, I think it’s the consequence of an undervalued share price rather than concerns about the sustainability of the group’s dividend.

Of comfort to me, analysts appear to agree with this assessment. They have a 12-month share price target that’s 33.3% higher than today’s price. On balance, I think it’s worthy of consideration.

Yes please!

If these two could increase in value by 24.1% by this time next year, I’d be a very happy investor. After all, a SIPP with an initial lump sum of £10,000 would grow to over £2.2m after 25 years, if it could achieve a growth rate like this. This is unlikely which is why I’m not complacent. It also explains why I shall continue to be on the lookout for other undervalued stocks, just in case the analysts are wrong about Burberry and Harbour Energy.

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In its 2025 annual report, Capri Holdings, which last week (2 December) announced that it had sold Versace to Prada, gloomily listed 13 factors — ranging from inflation to war — that had “created a challenging retail environment”.

Against this backdrop, Burberry’s share price is now (8 December) less than half what it was in the spring of 2023.

However, despite the industry’s woes, Prada paid €1.25bn (£1.09bn) for Versace. This is generous for a loss-making company, particularly one that’s experiencing falling revenue and earnings.   

A common measure used to approximate the cash flow of a company is EBITDA (earnings before interest, tax, depreciation, and amortisation). Unfortunately, during the year ended 29 March 2025 (FY25), Versace’s EBITDA was negative, which isn’t very helpful when it comes to valuing others in the sector. On the face of it, Prada’s paying over £1bn for a name and associated intellectual property.

Closer to home

As for Burberry, its results over the past three financial years have followed a similar pattern to Versace’s.

But at least it had positive adjusted EBITDA of £483m in FY25. Its current market cap plus net debt (including lease liabilities) means it has an enterprise value (EV) of £5.55bn. This gives it an EV/EBITDA ratio of 11.5, which according to PricewaterhouseCoopers, is exactly in line with the luxury fashion industry average.

Unlike one of its £295 white T-shirts, it looks as though Burberry’s stock is fairly valued at the moment. Although not a bargain, this suggests it will pick up if the luxury fashion market recovers. On this basis, I think it’s one for patient investors to consider.

The FTSE 100 also includes two other fashion stocks. I’m excluding Marks & Spencer and Primark-owner Associated British Foods, as clothing accounts for less than 50% of their revenue.

In recent years, middle-of-the-road Next has bucked the trend and repeatedly upgraded its forecasts. Thanks to improving online sales and overseas expansion, its share price is now 44% higher than it was at the start of 2025. I’d need to do more research before coming to a firm conclusion but with a forecast price-to-earnings multiple of 19, the stock looks a bit pricy to me.

King of trainers

Unlike some of the shoes it sells, JD Sport Fashion’s (LSE:JD.) stock is very cheap. It trades on only seven times forecast current year earnings. For its 2028 financial year, this drops to 5.6.

To achieve a better rating, I think it needs to demonstrate that it can grow organically and not just through acquisition. With consumer incomes being squeezed, like-for-like sales are contracting at the moment. Its also affected by problems at Nike, which has recently implemented a group restructuring and turnaround plan.

However, the British retailer has a clean balance sheet, which means it’s highly cash generative. And it retains a strong brand. This helps it maintain a peer-leading gross profit margin. Next year’s Fifa World Cup should also give it a bit of a boost. On balance, I think it’s worth considering.

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H1 results

The luxury fashion company’s share price is up 4% in early trading today (13 November) following the release of its H1 results.

It swung to an adjusted operating profit of £19m, up from a loss of £41m in the same period last year, showing early signs that the turnaround plan is starting to deliver.

Revenue came in at £1bn, down 5%, but retail comparable sales were flat overall, with growth returning in Q2 (+2%) after a slight dip in Q1 (-1%).

Gross margins improved to 67.9%, while adjusted operating expenses fell 5%, reflecting better efficiency and cost control.

The return to profit helped reduce free cash outflow to £50m, a significant improvement on the £184m outflow a year earlier. This also reflected tighter inventory management as it gears up for the festive period.

Strategy

The company’s turnaround strategy focuses on reinforcing its timeless British luxury identity while driving growth through key product categories, especially outerwear and scarves.

The brand has amplified its heritage through standout campaigns such as Chinese Valentine’s Day, Back to the City, and Winter 25. These campaigns focus on craftsmanship, iconic brand codes, and aspirational storytelling across global and local markets.

At the same time, the brand is targeting different customer segments to maximise the impact of its outerwear-led strategy. Each archetype hones in on a specific customer attribute. For example, the ‘Hedonist’ is a high-spending extrovert motivated by self-expression.

By combining campaigns with tailored product offerings for distinct customer types, it aims to grow brand desirability, drive sales in high-margin categories, and build a stronger, more profitable luxury business over the coming years.

Main Risks

It’s still very early days for the company’s turnaround strategy, so execution risk remains front and centre. If the Burberry Forward plan doesn’t deliver as expected (for instance, if campaigns fail to boost brand desirability or key products underperform) growth, margins and cash generation could all be affected.

As a business operating across multiple countries, it’s also exposed to currency fluctuations, which can erode profit margins. In addition, political instability, trade restrictions, or conflicts in key markets, such as China, could disrupt sales, supply chains, or staffing.

Bottom Line

The luxury brand’s H1 results point to a turnaround gaining real momentum, with the business swinging back into profit, margins improving, and Q2 retail sales returning to growth.

It’s not short of new initiatives and ideas, many of them bold and creative. This includes the Marina Bay Sands store redesign, featuring category-specific zones, a dedicated menswear floor, and the Scarf Bar.

At their core, these initiatives are about enhancing brand desirability while staying true to its outerwear heritage.

No dividend is on the table yet, but tighter costs, an improving cash position and ongoing strategic investments suggest the company is building a stronger, more profitable foundation.

I have been steadily building my holding in the company over the past year and see real momentum now, continuing to believe in its future growth.

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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.

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Its shares plunged as luxury-fashion sales fell, Chinese demand weakened and heavy discounting hit its premium image. I dived in after the first profit warning, only to find myself sitting on a quickfire 40% loss as its troubles intensified.

Burberry shares recover

Then the new broom management set out a strategy the market could embrace. It swung its focus back to ‘Timeless British Luxury’, streamlined product ranges and sharpened its brand appeal globally.

I was delighted when performance turned. The Burberry share price is up a stunning 75% over the last 12 months, although it’s still down 25% over two years. Personally, I’m now sitting on a 22% gain. Yet I’m a little baffled by the speed of recovery.

Salvaging a struggling company isn’t easy, and the job isn’t yet done. Also, China is still struggling while the US isn’t exactly booming. Investors seem to be pricing in a recovery that hasn’t happened yet.

FTSE 250 recovery star

The group’s most recent update on 18 July showed Q1 retail revenues still falling, 6% to £433m, as the macroeconomic backdrop remained “uncertain”. Store sales did rise 1% in its Europe, Middle East, India & Africa segment, and 4% in the Americas. But they dropped 5% in Greater China and 4% in Asia-Pacific.

On 9 October Deutsche Bank upgraded Burberry from Hold to Buy, and lifted its target price from 1,200p to 1,500p. Deutsche claimed “we are still in the early days of the sector recovery” and said what we really need is a Chinese recovery. It also echoed my own doubts about the recovery, claiming that its upgrade was a “leap of faith“.

Yet with French fashion giant LVMH springing back to life after a tough run, there are signs that sentiment is picking up across the luxury market.

China remains weak, but there are hopes of recovery in 2026, and a US trade deal would help here. There’s no dividend income on offer today, I’m afraid. When I bought Burberry, the trailing yield had just hit 6%, although I only ever got one payment before it was axed. We may have to be patient before it’s restored.

Waiting for results

We’ll get a clearer view of where Burberry is heading when it publishes interim results on 13 November. The share price has moved fast, but now the business has to play catch-up.

I’m not selling what is currently one of the most exciting momentum stocks in my portfolio. I think investors approaching the stock today should consider caution, as the group must now deliver to justify it improved reputation. I’ll sit tight, but won’t buy more.

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However, the luxury sector received a bit of a boost last week (14 October) when LVMH, owner of many ultra-pricey brands including Louis Vuitton and Moet & Chandon, announced its sales rose by 1% year-on-year in the third quarter of 2025. This beat analysts’ expectations and led to a big jump in the group’s share price. That same day, investors pushed Burberry’s shares higher on the news, perhaps hopeful that the group may also have turned the corner.

We will know whether this is the case on 13 November when the group announces its interim results. Traditionally, this is when its interim dividend is also confirmed. However, I think it’s a little early to expect payouts to resume for a couple of reasons.

Challenging conditions

Firstly, LVMH is about more than just high-end fashion. It sells everything from champagne to watches. And of its five divisions, sales increased in four of them. However, the outlier was its fashion and leather goods business, which experienced a 2% drop.

Secondly, the Chinese economy is continuing to slow. Q3 GDP increased by 4.8% but this is lower than during the previous two quarters. Most countries would love to experience a growth rate like this. However, the economy appears to be weakening. This is a potential problem because, in common with most retailers in the luxe sector, China is a hugely important market for Burberry.

Therefore, I think the best shareholders can hope for next month is evidence that the decline in sales is continuing to slow. I’m not expecting the group to resume paying a dividend just yet.

But to be honest, I don’t think Burberry is an income share. Although the term is often used to describe any stock that pays a dividend, I think it should be reserved for those that offer above-average payouts. And as the chart below shows, for much of the past decade or so, its yield has been pretty unspectacular.

My view

However, despite this, I think the group‘s share price could return to previous highs, although it might take some time.

I believe the power of Burberry’s brand should never be underestimated. The group’s distinctive check design still appeals to celebrities and its current autumn/winter collection was well received by the industry’s press. Its 2026 spring/summer range — with its festival vibe — is also generating positive headlines.

During the second quarter of the year, Burberry re-entered the Lyst Index of ‘Hottest Brands’ at number 17. This is compiled using the “biggest data set in fashion”, which incorporates actual purchases as well as social media activity. I think this gives the list credibility and could be a sign that things are on the turn.

Also, Burberry isn’t the most expensive designer brand around. This could help it recover more quickly than some of its rivals. 

That’s why I own the stock. And for the same reasons, others could consider adding it to their own portfolios.

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