Burberry Group PLC (LSE:BRBY) shares strutted over 15% higher on Wednesday as investors and analysts drooled over the British luxury brand's stronger-than-expected fourth-quarter performance and new cost-cutting targets.
Deutsche Bank said the FTSE 250-listed group was "showing further progress on its brand turnaround" with sales of outerwear and scarves in the fourth quarter better than the industry average and leather goods weaker.
UBS noted that Q4 retail like-for-like sales were down 6% compared to a circa 4% slowdown seen across the industry, and also better than the consensus forecast for an 8% decline.
Second-half adjusted earnings of £67 million versus the average analyst estimate of £52 million.
Inventory at the 29 March year-end was down 7%, which Deutsche said "helped working capital" but the free cash inflow of £65 million was "a bit weaker" than expected.
As the outlook for the year to March 2026 remains uncertain and the brand in a turnaround phase with a focus on brand heat, margin improvement, productivity and cash flow, "accordingly there is no explicit guidance", said Deutsche.
"We like the Burberry story and see the sequential improvement in cfx sales as the key factor for investors over the next 12 months."
Analysts said Burberry’s guidance includes a mid-teens percentage decline in H1 wholesale sales and an FX headwind of £55 million on sales and £10 million on EBIT.
Morningstar analysts said: "We like the marketing refocus on products where Burberry’s brand is the strongest and most differentiated – its outerwear and scarves. This strategy can be compared to Pandora’s successful turnaround, which started in 2018-2019 from refocusing on its core product category.
"For Burberry, operational cost cuts, such as headcount, will be implemented to reinvest in the brand marketing."