Burberry returns to profit as Schulman's turnaround lifts sales 6%

Burberry Group said Thursday it swung to a pretax profit of £19 million for the six months to Sept. 26, reversing a £48 million loss a year earlier, as Chief Executive Joshua Schulman's return to trench coats and wider price points lifted sales 6%.

The half marked a fifth straight quarter of comparable retail sales growth for the British fashion house, according to its interim results statement. Schulman took charge in 2024 after an earlier push into high fashion and steep price increases drove shoppers away and sales lower, City A.M. reported. Revenue rose to £1.10 billion, ahead of the £1.08 billion analysts had forecast in a company-compiled consensus, Alliance News reported.

Burberry shares rose 7.2% to 1,171.50 pence in London on Thursday morning, the best performance in the FTSE 100 index, Alliance News said.

Adjusted operating profit climbed to £62 million from £19 million, above the £44 million consensus, and the adjusted operating margin widened to 5.7% from 1.9%. Gross margin improved to 68.3% from 67.9%, while net operating costs were flat at constant exchange rates. Comparable retail sales grew 4% in both the first half and the second quarter.

The Americas did most of the work. Comparable sales in the region rose 12% in the half and 11% in the second quarter, mostly from local shoppers, helped by local marketing events and better conversion in stores, the company said. Greater China grew 7% for the half but slowed to 5% in the second quarter from 9% in the first. Asia Pacific rose 3%. Europe, the Middle East, India and Africa fell 2%, which Burberry tied to fewer tourists and weak foot traffic, especially at outlets.

Schulman said that luxury buyers around the world have grown tired of exorbitant prices and that Burberry's pitch on value was landing with Chinese customers, the Guardian reported. "Burberry has always had a somewhat more democratic approach than some of our European peers and has a universal appeal," he said.

That approach rests on what Schulman calls a pyramid of pricing. It runs from cotton-cashmere socks starting at £85 and scarves from £195 up to leather coats and top bags that can cost more than £9,000, the Guardian said.

Outerwear sales grew by double digits in the half, led by rainwear. City A.M. said the tropical gabardine, a version of the trench that sells for about £1,795, did particularly well, as did cropped trench coats priced below the full-length style. Leather goods picked up speed in the second quarter on demand for Cotswolds and vintage-check handbags, some of which sell for more than £2,000. Online sales rose by a mid-teens percentage, and womenswear, menswear, childrenswear and accessories all grew.

Wholesale revenue rose 17%, beating the company's own guidance, while licensing revenue fell 5%. Burberry now expects wholesale to grow 10% to 12% for the full year and puts annualized cost savings at around £100 million. Its leverage ratio stood at 1.7 times.

Schulman also addressed Frasers Group, the retail group that now holds a 6% stake after trimming it from 7.4% in October, Vogue Business reported. He described Frasers as an important wholesale customer in the U.K. and said Burberry would meet with it as it does with all investors.

The chief executive said shoppers are traveling less and spending closer to home, a pattern he said had held all year and had hit sales at discount outlets while local spending held up in flagship city stores, including in London. He said no one could predict when customers would loosen their spending, though history suggested luxury is a cyclical business.

Burberry said it expects revenue growth and margin expansion in the fiscal year that ends in March, while staying mindful of an uncertain outside environment. It will issue a third-quarter trading update on Jan. 21 and hold a capital markets day for investors in London in March. More coverage is on the 1NFLUENC3 Lifestyle & Fashion page.