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The Burberry Group (LSE:BRBY) share price was up nearly 8% in early trading today (14 May), after the upmarket fashion icon released its results for the 52 weeks ended 29 March 2025 (FY25).
And having looked at the accompanying press release, I don’t really understand why.
Delving into the detail
For example, revenue for the year was 17% lower than in FY24, with like-for-like sales down 12%. Turnover fell in all three territories. Asia Pacific was the worst performing with a 16% drop. This follows a 17% fall in FY24.
If that wasn’t bad enough, the group’s margin — a key metric for the luxury sector — was also down.
In FY25, its gross profit margin was 62.5%. That’s 5.2 percentage points lower than for FY24. To put this in context, had it been maintained at last year’s level, earnings would have been £154m higher and a post-tax profit would have been reported.
Instead, a loss of £75m was disclosed. The group made a £270m profit in FY24.
Not surprisingly, the directors decided not to recommend payment of a dividend.
Although net debt was stable, due to the fall in earnings it has now increased to 2.3 times adjusted EBITDA (earnings before interest, tax, depreciation and amortisation). At 30 March 2024, it was 1.4 times.
| Measure | 52 weeks to 1.4.23 | 52 weeks to 30.3.24 | 52 weeks to 29.3.25 |
|---|---|---|---|
| Revenue (£m) | 3,094 | 2,968 | 2,461 |
| Gross profit margin (%) | 70.5 | 67.7 | 62.5 |
| Adjusted operating profit (£m) | 634 | 418 | 26 |
| Adjusted earnings per share (pence) | 122.5 | 73.9 | (20.9) |
| Dividend per share (pence) | 61 | 61 | – |
| Free cash flow (£m) | 393 | 63 | 65 |
Looking ahead
Commenting on the results, Joshua Schulman, Burberry’s CEO, sounded positive. He said: “While we are operating against a difficult macroeconomic backdrop and are still in the early stages of our turnaround, I am more optimistic than ever that Burberry’s best days are ahead and that we will deliver sustainable profitable growth over time.”
But I think the phrase “early stages” is key. For the first half of FY26, the group’s expecting wholesale revenue to decline by a “mid-teens percentage”. Given that we are nearly seven weeks into this period, this estimate should be reasonable accurate.
However, investors have clearly seen enough in today’s results to make them think that the group’s turned the corner. And today’s market reaction continues a strong share price performance over the past eight months or so.
Since recording a 52-week low in September 2024, the stock’s risen over 60%.
My verdict
Personally, based on its FY25 results, I think the share price is running ahead of the underlying performance of the group. I know a company’s stock market valuation is supposed to reflect its future earnings potential but I think it’s too early to conclude that the group will be profitable soon.
Having said that, I think it’s easy to forget how resilient the Burberry brand has been over the years.
The British legend was founded in 1856 and has survived many downturns before. Since opening its doors, it’s coped with two world wars, many recessions and numerous economic slowdowns.
And despite its problems, it still sold over £2bn of fashion items last year. The cheapest men’s T-shirt on its website currently retails for £290. If it can sell such a simple garment for this price, I think it’s a little premature to write off the brand.
To be honest, a bit like its T-shirts, I think Burberry’s shares are expensive. This morning’s movement has added another £250m to the group’s market cap which I don’t think is justified from what I’ve read in the company’s earnings release.
