Burberry stock drops even as Americas and China demand boost turnaround efforts

Burberry‘s full-year results marked a “meaningful inflection point,” the company said Thursday, as the luxury group reported sales growth boosted by strong demand from its key Americas and China markets.

But Burberry stock slipped 6.84% by 11.21 a.m. in London (6:21 a.m. ET) as a weaker performance in Europe and the Middle East weighed on the group’s ongoing turnaround efforts.

Comparable sales grew 2% over the fiscal year, helped by a 10% growth in both the Americas and China in the quarter ended March, Burberry said. That growth offset a miss in European sales, which Burberry pinned on reduced tourist flow to the region due to the conflict in the Middle East.

CFO Kate Ferry declined to comment on trading in April and May, given the current macroeconomic situation, in a call with analysts.

Analysts highlighted three consecutive quarters of improvement for the firm, which has made efforts to return to its core British heritage brand, such as trench coats and scarves, and increased marketing spend.

“All boxes ticked, execution firmly on track,” said Citi analysts about the print.

Burberry is ahead of many of its peers in its efforts to return to growth after several difficult years for the luxury sector. Its relatively low exposure to the Middle Eastern region has also been cited as a comparative advantage for the group amid the current conflict.

“We’ve returned to profitable comparable sales growth, with a strong fourth quarter driven by Momentum in Greater China and Americas,” CEO Joshua Schulman said in a statement.

“Our strategy is working and there are clear opportunities for further growth.”

Schulman took the reins in July 2024 with the task of steering the company back to growth and has set out a target of £3 billion in annual revenue as part of its long-term strategy, “Burberry Forward.”

Fiscal 2026 revenue came in largely in line with expectations at £2.4 billion ($3.25 million), flat at constant exchange rates. 

Jefferies said that the solid end to the fiscal year was expected as the company’s turnaround efforts bear fruit, and outdoor wear peer Moncler posted a strong quarter in April. They attributed the 4% profitability beat to Burberry’s cost-saving program and gross margin expansion, but said it was likely below expectations of more bullish buy-side hopes. 

Full-year adjusted operating profit came in at £160 million, up from £26 million a year ago.

Burberry said it was “mindful of the uncertain geopolitical and macro-economic environment and its potential impact on consumer confidence,” but said it expects to make further progress on financial ambitions in 2027.

The conflict in the Middle East has hit many of Burberry’s peers hard. LVMH, Kering, and Hermes disappointed Investors with earnings misses last month, driven by subdued sales in the region. 

The region typically accounts for mid-single-digit sales for major luxury brands, but had been a bright spot in a sector that experienced largely sluggish growth elsewhere.

Burberry said comparable sales in EMEA and India declined 2% due to reduced tourism in the region and the Middle East conflict towards the end of the quarter.