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Investing.com -- Burberry (LON:BRBY) reported a 1% drop in comparable retail sales for the first quarter ended June 28, beating analyst expectations for a 3% decline and offering early signs of stabilization. The update marks a modest improvement for the British luxury brand, which has faced headwinds in recent quarters.
The company said total retail sales declined 2% at constant exchange rates, with retail space contributing a 1% headwind. Currency movements weighed further, with a 4% negative impact, bringing reported revenue to £433 million, down 6% year-on-year.
By region, comparable sales rose 1% in EMEIA and 4% in the Americas, while Greater China and Asia Pacific fell 5% and 4%, respectively.
Commenting on the smaller-than-expected 1% drop in comparable sales, Jefferies analysts said that "it is important to consider the broader significance of that number."
They pointed out that the first half of last year marked the low point for Burberry’s challenges in product, marketing, and merchandising, and that the company has now spent nearly 10 months refocusing on its brand heritage.
While Jefferies said “all the right steps have been taken,” the broker questioned whether flattish sales off last year’s low base justify the current valuation.
Burberry is trading at over 32 times March 2027 earnings, based on consensus margin estimates of around 9%. Jefferies argued that supporting this valuation would require “a very sharp rebuild in (still markedly industry lagging) sales densities.”
"For now the broader global industry footfall challenges appear stronger than the benefits of the ’Britishness’ revival," analysts led by James Grzinic added.
In its outlook, Burberry acknowledged ongoing challenges but expressed cautious optimism. “We are still in the early stages of our turnaround, and the macroeconomic environment remains uncertain,” the company said.
Management added that it is focusing on building “brand desire, as a key requisite to growing the topline,” and will prioritize investment in the first half of the year.
Burberry also reiterated plans to deliver margin improvement through “simplification, productivity and cash flow,” and said it remains “confident that we are positioning the business for a return to sustainable, profitable growth.”