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Investing.com -- RBC Capital Markets has expressed optimism over Burberry’s latest strategic reset, citing progress in both product repositioning and cost discipline.
Analysts view the company’s renewed focus on outerwear and its efforts to streamline spending as credible steps toward improving performance.
Outerwear remains central to Burberry’s identity, and RBC notes the brand is now sharpening its commercial approach.
While outerwear accounts for 30% of revenue, roughly £720 million, it is still below 2019 levels.
RBC expects the upcoming Autumn/Winter 2025 collection, due in stores from June, to feature a broader and deeper product range, with a focus on accessible price points around £1,000.
The goal is to improve volume and market share against peers such as Moncler and Canada Goose, which currently outperform Burberry (LON:BRBY) in outerwear revenue despite smaller or comparable store networks.
Burberry’s effort to simplify and expand its range aligns with an internal shift toward viewing outerwear as a key revenue driver rather than just a brand statement.
RBC analysts suggest this change could improve SKU productivity and better address customer demand, especially if the brand emphasizes volume growth.
On costs, RBC sees Burberry exiting a heavy investment period tied to store refits. With 60% of locations now in a new format, capital expenditure is expected to decline, falling to £130 million in fiscal 2026 from £150 million the previous year.
New initiatives, such as the rollout of scarf bars across 200 stores by year-end, reflect a more targeted, returns-focused approach to spending.
Burberry’s store network, which includes 422 retail sites, remains a concern for RBC, given its impact on productivity. The analysts highlight that Burberry generates just €5.9 million per store, well below luxury peers.
While management appears focused on leveraging the current network through improved product and pricing, RBC believes store rationalization may be needed if revenue fails to recover quickly.
Outlets remain an efficient part of Burberry’s operations. Although they represent only 13% of the store base, they contribute 20% of retail revenue and 43% of retail EBIT, with gross margins of 62% and EBIT margins of 31%.
RBC expects Burberry to reduce its outlet count slightly over time but maintain the channel to manage inventory from its ready-to-wear-heavy product mix.
RBC forecasts an EBIT margin of 16% in the medium term, driven by improved gross margins, controlled spending and a £100 million cost savings plan due by fiscal 2027.
The brokerage projects adjusted EBIT of £140 million in fiscal 2026, up from £26 million in 2025, with £56 million in expected savings contributing to the gain.