Burberry returns to profit as its turnaround reaches a fifth quarter of growth
The British luxury house more than tripled adjusted operating profit to GBP 62 million, helped by outerwear, leather goods and strong demand from wholesale partners. Shares rose about 8%.
Burberry returned to profit in the first half of its 2027 financial year, reporting a pre-tax profit of GBP 19 million for the 26 weeks to 26 September 2026, against a loss of GBP 48 million a year earlier. Revenue rose 6% to GBP 1,098 million and comparable retail sales grew 4%, the fifth quarter of growth in a row, according to the company's interim results published on Thursday 12 November.
Adjusted operating profit more than tripled to GBP 62 million from GBP 19 million, and the shares rose about 8% on Thursday, Investing.com reported.
The numbers
The adjusted operating margin widened to 5.7% from 1.9%, an improvement of 390 basis points at constant exchange rates. Reported operating profit was GBP 54 million, compared with a loss of GBP 18 million a year earlier, and adjusted diluted earnings per share rose to 3.4 pence from 0.6 pence, the results show.
Wholesale revenue rose 17% to GBP 174 million, ahead of guidance, while licensing revenue fell 5% to GBP 28 million, as expected, according to Investing.com. Gross margin was 68.3%, up 40 basis points at constant currency, helped by stronger full price sales and a one off supply chain rebate. Chief financial officer Kate Ferry said the underlying gross margin, excluding that rebate, was 67.8%, according to MarketBeat's summary of the earnings call. Net operating expenses were flat at constant currency.
Free cash flow was an outflow of GBP 147 million, compared with an outflow of GBP 50 million a year earlier. Burberry said this was on plan and reflected a normalised inventory profile ahead of its peak selling season. Net debt including leases was GBP 988 million, a leverage ratio of 1.7 times, and the board did not declare an interim dividend, Investing.com reported.
Where growth came from
Comparable retail sales rose 12% in the Americas and 7% in Greater China in the half, while Asia Pacific grew 3%. Europe, the Middle East, India and Africa declined 2%, which the company put down to reduced tourist activity and weak traffic, particularly in outlets. Outerwear grew by double digits, leather goods accelerated in the second quarter and e-commerce sales were up in the mid teens.
Comparable sales growth beat the 3% that analysts had expected, according to Investing.com, which quoted Citi analysts noting that the result came despite tougher comparisons and a softer luxury backdrop.
A value message in a tired luxury market
Chief executive Joshua Schulman, who launched the Burberry Forward strategy two years ago, said the turnaround was working. "Luxury customers around the world are experiencing some fatigue with exorbitant pricing and in this context our strategy of having great value for money is resonating strongly with Chinese customers," he told The Guardian. He pointed to a "pyramid of pricing" that runs from scarves at GBP 195 and socks at GBP 85 up to leather coats costing more than GBP 9,000.
In its outlook, Burberry said it expects revenue growth and margin expansion in the 2027 financial year while remaining "mindful of the uncertain external environment". It expects wholesale revenue to grow 10% to 12%, annualised cost savings of around GBP 100 million, of which GBP 80 million were delivered last year, and capital spending of around GBP 100 million. The group will publish a third quarter update on 21 January 2027 and hold a capital markets day in London in March.
What it means for European founders and investors
Burberry's numbers add to a picture of a split luxury market. Brands that offer clear value and strong product categories are regaining ground, while customers who spent freely after the pandemic have become more selective. For founders building consumer and fashion brands, the lesson from Burberry is that a tighter focus on core products and a broad price ladder can bring growth back even when the market is soft.
The weak spot is Europe. Fewer tourists and weaker outlet traffic held back sales in Burberry's home region, while local shoppers in the Americas and China drove growth. That matters for retail and travel retail startups that depend on tourist flows into Europe's big shopping cities.
The rise in wholesale also shows that department stores and multi brand partners are reordering again, which is good news for suppliers and brand platforms that serve them. For more on European consumer brands, see our reports on Pandora's third quarter and the sale of Elemis to PAI Partners.
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