The volatile Burberry (LSE: BRBY) share price spiked up 10% on Friday (27 January). Christmas trading didn’t exactly set the world on fire, but I see cause for optimism.
Chief executive Joshua Schulman was upbeat about the company’s “It’s Always Burberry Weather” promotion and its “Wrapped in Burberry” festive campaign. But comparable Q3 store sales fell 4% below the same period a year ago. I found a 9% fall in Asia Pacific revenue of most concern. The Burberry brand has traditionally been very strong in China and the region.
The rising share price since September does hint at greater long-term growth hopes. We’re still looking at a 45% share price fall in the past five years, mind.
Passive income stocks: our picks
Do you like the idea of dividend income?
The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?
If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…
Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.
What’s more, today we’re giving away one of these stock picks, absolutely free!
Reasons to be cheerful
The full year, with results due on 14 May, is still going to be a tough year of retrenchment. Burberry embarks on a “cost savings programme to unlock annualised savings of around £40m, with around £25m to be delivered in FY25, and of which £8m realised in H1 FY25“.
There’ll be restructuring costs too, estimated at around £20m for the full year. And the company has “suspended dividend payments in respect of FY25 in order to maintain a strong balance sheet and our capacity to invest in Burberry’s long-term growth“.
How soon might these actions bear fruit? This update suggests it could be sooner than we’d expected. It said: “In light of our Q3 performance, it is now more likely our second-half results will broadly offset the first-half adjusted operating loss, notwithstanding the uncertain macroeconomic environment.“
It can often take a fresh boss to really see what was going wrong with a company. They have the advantage of not being responsible for whatever that is. And they can take drastic action with no loss of face. So far, the market seems to be going along with the new CEO’s vision. But the shares have given up some of their gains to fall back 4% at the time of writing.
The rest of 2025
We need to be cautious. As the boss himself said, “it is still very early in our transformation and there remains much to do“. I’m wary of reading too much into early reports of a brightening outlook. How many times have I heard company management going on about transformations, early days, and a lot more to do? More than once, and it can often take longer than hoped.
The economic outlook doesn’t exactly make me envision vast hordes of shoppers rushing out to wrap themselves in Burberry. A lot could still go wrong, particularly internationally. Q3 sales in the Americas rose by 4%, but might threats of tariffs hit that? And those weak China sales are a concern.
I need to see full-year results, which we’ll have soon. But if the outlook for the coming 2025-26 year lives up to the optimism that investors seem to be feeling now, I think it might just mark the start of a sustained Burberry share price run.
