Key Morningstar Metrics for Burberry
- : GBX 1,370Fair Value Estimate
- : ★★★Morningstar Rating
- : NarrowMorningstar Economic Moat Rating
- : HighMorningstar Uncertainty Rating
What We Thought of Burberry’s Earnings
Burberry BRBY reported flat revenue at constant currency in fiscal 2025-26 and retail comparable sales up 2%. It swung back to profits on a reported basis and delivered 6.6% adjusted operating margin.
Why it matters: Burberry’s performance encouragingly improved throughout the year with comparable store sales growth of 5% in the fourth quarter (3% in the third quarter and flat in the first half). The new strategy, which includes focusing on core items where the brand is differentiated (outerwear, scarves) and pragmatic pricing, alongside a somewhat better macroeconomic backdrop seems to lead to sales improvement.
- Regionally, in line with peers, Burberry saw marked acceleration in Americas with 10% comparable retail sales growth (2% in prior quarter) and improvement in Greater China (10% versus 6% in prior quarter). EMEA sales were slightly down, negatively affected by the Middle East conflict.
- Outerwear outperformed in the year in all regions, in line with the company’s strategy of focusing on this product area, which we view as very plausible.
- Adjusted operating margin was up to 6.6% from 1% a year ago, driven by cost savings and significant improvement in the gross margin (up 530 basis points at constant exchange rates), suggesting improved full-price sales and health of the brand. Inventories were 5% down from the prior year (1.6% decline in revenue), which suggests less need for discounts in future quarters.
The bottom line: We are maintaining our GBX 1,370 fair value estimate per share for narrow-moat Burberry, as the results broadly matched our forecasts (slightly weaker revenue but slightly stronger margin). We believe Burberry should be able to return to 4% revenue growth and 20% margin over time, but it is already baked into the price.
