Burberry Group PLC (LSE:BRBY) turnaround is finally winning over sceptics.
UBS has upgraded the stock to 'buy' from 'neutral' and lifted its price target to 1,400p, up from 918p.
That implies a 45% upside from current levels and reflects growing confidence in the brand’s return to its British roots.
Following stronger-than-expected fourth-quarter results, UBS analyst Zuzanna Pusz said Burberry’s strategy now fits the moment.
The group is refocusing on core strengths, heritage, outerwear and accessible pricing, just as demand across the luxury sector softens.
Luxury fatigue
The move away from expensive, over-styled collections could allow Burberry to gain market share without heavy investment, especially as rivals struggle with what UBS calls “luxury fatigue”.
Earnings forecasts have been upgraded sharply, with UBS now projecting earnings per share to rise 21% in 2026, 56% in 2027 and 62% in 2028. Sales growth is expected to average 6% a year through to 2028, ahead of the sector average of 4%.
Burberry’s efforts to cut costs and improve margins are also landing better with analysts.
Cost cutting
Management recently announced a £100 million cost-saving plan to be delivered by 2027, up from £40 million previously.
At the same time, the company is starting to scale back its outlet presence, which has long diluted margins and brand equity.
UBS now sees Burberry’s operating margin returning to 16% by 2030, with the long-term potential closer to 18%.
That’s up from earlier estimates of 12% and 16.5%. This, along with stronger sales and improved brand heat indicators like wholesale demand and licensing growth, underpins the higher valuation.
At around 24 times 2026 earnings, falling to 16 times in 2027, the shares are not cheap on paper.
Valuation game
But UBS argues the earnings trajectory justifies the price, with a projected compound growth rate of 85% over three years.
The valuation now includes a premium relative to sales, at the top of Burberry’s historical range.
It is still early in the turnaround, and execution risk remains.
But UBS is now firmly backing the strategy under chief executive Jonathan Akeroyd and creative director Daniel Lee.
With the brand more clearly defined and operational discipline returning, the case for a re-rating is building.
The shares, up 17% on Wednesday, added a further 1.2% on the back of the UBS upgrade.