Turnaround strategy targets trench coat heritage and operating efficiencies, but U.S. outlook remains cloudy
Shares in Burberry Group (LON:BRBY) jumped 15.72% to close at 956.80 pence on Wednesday, after the British luxury house unveiled a sweeping restructuring plan that includes slashing 20% of its global workforce, cancelling a factory night shift, and expanding its cost-saving targets by £60 million.
The job cuts—amounting to 1,700 roles—will be rolled out over the next two years, largely affecting office and store staff, as well as workers at Burberry’s trench coat manufacturing site in Castleford, England. The brand will also eliminate the factory’s night shift, with CEO Joshua Schulman citing “overproduction” concerns and an effort to preserve UK manufacturing operations sustainably.
The company’s share price surge followed better-than-expected results for the fiscal year ending March 29, as well as a confident investor update from Schulman, who took the helm last year. He said early signs of progress were evident in retailer demand, with Burberry’s February fashion show driving “double-digit increases” in wholesale orders from partners who had previously scaled back.
A heritage reboot under pressure
Schulman, formerly of Coach and Jimmy Choo, has pivoted Burberry’s strategy toward classic British themes—doubling down on trench coats, scarves, and staple pieces—after years of inconsistent branding, product missteps, and a downturn in global luxury demand. He is the company’s fourth CEO in a decade.
Burberry reported an adjusted operating profit of £26 million for FY2025, narrowly avoiding a loss and beating consensus expectations of £11 million. Fourth-quarter comparable sales declined 6%, outperforming forecasts for a 7% drop. Still, revenue for the year fell 12% to £2.461 billion, as demand softened across all major regions.
- Asia-Pacific: Sales fell 9% year-on-year
- Americas: Dropped 4%, reversing third-quarter gains
- EMEIA (Europe, Middle East, India, Africa): Declined 4%
Schulman acknowledged “things got a little choppy” in the U.S. market during February, which is a critical region for Burberry, accounting for 19% of total sales. The company also flagged “incremental unmitigated tariff risks” as a downside risk amid rising geopolitical tensions.
Chief Financial Officer Kate Ferry downplayed tariff impact concerns, stating that “wherever tariffs end up, we have the levers to mitigate it.” However, analysts noted uncertainty remains around the broader macroeconomic environment and ongoing trade policy shifts.
A £100 million cost-saving target
Wednesday’s announcement brings Burberry’s total targeted savings to £100 million by 2027—£60 million from the latest restructuring, on top of £40 million outlined in November. The strategy includes streamlining procurement and real estate footprints, alongside the workforce reductions.
“The customers we want to grow, who have been declining for three years, are now excited about what they see,” Schulman told investors. Bernstein analyst Luca Solca said the market was celebrating “the compounding of better top line and lower costs,” which could pave the way for “significant profit progression.”
Challenges remain in core product strategy
Despite investor optimism, questions remain about the scalability of Burberry’s renewed focus on “timeless” items like the trench coat. Analysts at Third Bridge pointed out that such products, while iconic, limit repeat purchases—unlike trend-driven collections.
Burberry’s Creative Director Daniel Lee, appointed under Schulman’s predecessor Jonathan Akeroyd, now faces the challenge of injecting innovation into a deliberately conservative product mix. Jefferies analysts noted the turnaround appears to be a “slow-burn,” with sustained execution needed to convince long-term investors.
“We are still in the early stages of our turnaround,” Schulman acknowledged, “but I am more optimistic than ever that Burberry’s best days are ahead.”
