Burberry returns to profit as back-to-basics strategy lifts sales 6%

Burberry returned to profit in the six months to 26 September, reporting a pre-tax profit of £19 million against a £48 million loss a year earlier, though an earlier report put the half-year profit at £54 million, a different measure. Sales rose 6% to £1.1 billion, which chief executive Joshua Schulman said outperformed a challenging luxury market.

“Our strategy is working,” Schulman said, crediting the back-to-basics approach introduced under the Burberry Forward programme. The British house, founded in 1856 and famous for its trench coats and tartan, has spent two years returning to what he called the sweet spot in the luxury market.

The growth spread unevenly across regions. Sales climbed 15% in China and 14% in the Americas, while Europe and the Middle East fell 1%, a decline the company partly attributed to the Iran war. Online and wholesale channels were particularly strong in China and the US.

Schulman framed the pricing strategy as the engine of the recovery. Burberry now spans what he called a pyramid of pricing, from scarves starting at £195 and cotton-cashmere socks from £85 up to top-tier bags and coats that can exceed £9,000 for a leather version.

“Luxury customers around the world are experiencing some fatigue with exorbitant pricing and in this context our strategy of having great value for money is resonating strongly with Chinese customers,” Schulman said. He argued the brand has always had a more democratic approach than many European peers.

Lightweight jackets and tropical gabardine raincoats sold well over the period, as did the Cotswold range of leather bags and accessories carrying the house check. Schulman said locally relevant marketing also helped, including dedicated product for China's Valentine's Day this spring and for the coming lunar new year.

Where local spending held up

“It is no secret global tourism is down but the local customer has been spending in their respective regions,” Schulman said, calling it a trend visible all year. Wealthy shoppers globally are travelling less and spending more cautiously, a shift that has been hitting luxury sales industry-wide.

Tourist spending has weakened in the discount outlets, Schulman noted, while local demand has held up in flagship city-centre stores, including London. The split is central to why the company reads its numbers as resilience rather than recovery driven by a single market.

The independence question

Burberry is the last major British luxury house still independent, publicly traded on the London Stock Exchange with no family or conglomerate in control. When we covered who owns Burberry, we noted that independence allows fast pivots but leaves no parent to absorb a revenue drop or deter a takeover.

The Burberry Forward reset, which Schulman leads, refocuses the house on outerwear and scarves while cutting costs. It is a bet that public markets will grant a heritage turnaround the years it needs, and this half-year's swing from loss to profit is the first hard evidence the bet is landing.

When we covered Burberry's half-year in a separate report, the swing to profit was the headline; this update fills in the regional detail and the pricing ladder behind it.

The strategy positions Burberry against a backdrop of spending fatigue across the sector. Schulman's bet is that accessible price points and heritage staples can hold growth where peers trading on sharp price increases are stalling, and the China figure gives the argument its strongest evidence.

Schulman's diction is careful. He does not claim the luxury market has recovered, only that Burberry has outperformed it, and he couples that with a warning on tourism. The honest framing is itself part of the message to investors watching a house still rebuilding after its reset.

Schulman attributes the Chinese strength to value, but the same economic caution that benefits the entry ladder could yet slow the top tier of bags and coats. The statement does not break out sales by product category, so the split between ladder and summit is not disclosed.

The pyramid works only if both ends move. Schulman is betting that affordable scarves and socks and leather pieces priced above £9,000 can coexist under one check, and this half-year suggests they can, at least for now.

There is no date promised for the next milestone, and Burberry has not revised any full-year guidance in this statement. The next test will be the lunar new year product Schulman flagged, a localised bet that he hopes carries the China momentum into the new calendar year.

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Image: Burberry