Burberry Group PLC's (LSE:BRBY) shares surged 14% in early trading as investors responded positively to a turnaround strategy introduced by new CEO Joshua Schulman, which includes a higher-than-expected £40 million in cost-savings.
The British luxury fashion brand announced its “Burberry Forward” plan following a challenging first half, marked by a 22% drop in sales to £1.09 billion and pre-tax losses of £80 million.
According to analysts, the financial carnage was not quite as bad as had been envisaged, giving a pep to sentiment.
Schulman outlined a strategy focused on Burberry’s heritage in outerwear and core customer base, aiming to reinvigorate brand appeal and return to profitability.
He acknowledged past missteps, stating Burberry’s previous strategy had over-emphasised seasonal fashion and a niche aesthetic, distancing the brand from its loyal customer base.
The new blueprint involves enhanced productivity, a major cost-saving drive, and a return to “British wit and style” in marketing, with recent campaigns highlighting
Burberry’s iconic outerwear. Burberry, which operates 429 stores globally, is also managing high losses in the Asia-Pacific region due to a steep 25% drop in sales there.
Analysts have praised Schulman’s back-to-basics approach but caution that recovery may take time.
"The task of rebuilding sales densities, and by extension margins back to dd levels, remains an arduous one," said US investment bank Jefferies, repeating its 'underperform' recommendation for the shares.
The shares rose 99.8p to 831.2p, but are down 41% year-to-date, reflecting concerns over the fashion brand's performance against a backdrop of sluggish demand.