Burberry Stock Analysis (BRBY) – The Knight Does Not Charge

Burberry stock (BRBY) fundamentals, overview

Burberry Group plc (BRBY), hereinafter referred to as Burberry (BRBY), is an iconic British fashion company founded in 1856 by Thomas Burberry. Headquartered in London, the company has become one of the world's most recognisable premium fashion brands, particularly known for its signature check pattern and classic trench coats. Burberry is listed on the London Stock Exchange, a member of the FTSE 250 index, and operates over 400 own-owned stores worldwide, as well as a strong online presence.

The company employs around 9–10000 people worldwide and is present in the premium/luxury market, selling accessories, perfumes and cosmetics in addition to fashion. Innovation and digital experiences play a prominent role in Burberry's strategy, and it also has a strong focus on Asian markets, especially China. It also places great emphasis on sustainability: its goals include carbon neutrality and the promotion of circular fashion.

Market capitalization: GBP 4.49 billion (as of 2025-09-05)
Investor relations: https://www.burberryplc.com/investors
iO Charts share subpage: BRBY.LSE

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📒Table of Contents📒

I have created a table of contents to make it easier for you to navigate through the longer content: Burberry (BRBY)

• The specialties of Burberry (BRBY).
• How does Burberry (BRBY) make money and what market advantages does it have?
• Burberry (BRBY) metrics
• Burberry (BRBY) acquisitions
• Burberry (BRBY) management
• Competitors: Burberry (BRBY) opponents
• What risks does Burberry (BRBY) face?
• Burberry (BRBY) valuation
• Major news and the last quarter
• Other interesting facts about Burberry (BRBY)

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〽️Market segment analysis〽️

In this section, I examine the dynamics of the market segment, how it operates, who the main players are, and what tailwinds or headwinds the players in the given market have to deal with. I will not analyze companies in depth, but I will touch on the market share of individual companies.

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The market segment presentation is largely based on the previous Kering in-depth analysis, but contains an abbreviated and slightly modified, supplemented form. You can find the full presentation of the sector here: Kering Stock Analysis (PPRUY) – Gucci is not selling.

The luxury market is a very specific segment that consists of several sub-segments. Luxury products can basically be classified into two large groups:

• 👜soft luxury products – constant, recurring consumption, but characterized by lower prices, therefore naturally fluctuates more:
  • 💄cosmetics: Estee Lauder, L'Oreal
  • 👔clothing and accessories: LVMH (MC), Richemont (CFR), Hermès (RMS), Kering (PPRUY), Burberry (BRBY)
  • 🍷alcohols: Some products from Diageo and Brown-Forman. We analyzed these: Diageo (DEO), Brown-Forman (BF-B)
• ⌚hard luxury products – less frequent purchases, but much higher value, less affected by inflationary pressure because these are purchased by people with very high income levels:
  • 🚗car manufacturers: Ferrari, Lamborghini, Bugatti etc.
  • 💍jewelry: CARTIER
  • ⌚watch manufacturers: Rolex, Tag Heuer, Swiss watch trinity

In other words, when we talk about a clothing or sports car manufacturer, or perhaps a bag manufacturer, we have to look at the company completely differently if it is in the luxury industry. A very good example of this is Porsche AG (P911), which is a car manufacturer between the premium and luxury levels, but is no longer able to deliver the qualities expected of luxury products. You can read the analysis here: Porsche AG (P911) Stock Analysis – They're Not Pressing the Gas.

The luxury industry, unlike average consumer products, has the following characteristics:

• ☝🏼With the growing population, there are more and more consumers
• ☝🏼The proportion of the rich increases within the growing number of consumers (more wealth is created than is lost)
• ☝🏼the rich want to show more and more of their wealth to other rich people (especially in prestige-based societies like China), an endless growth trajectory
• ☝🏼The rich are not really affected by inflation, their consumption is not cyclical. This is especially true for the UHNWI, or ultra-high net worth individuals
• ☝🏼The luxury industry is built on traditions, and the generational change often passes on this attitude, as do luxury items (cars, bags, etc.). A great example of this is the Birkin bag, which is usually passed down from mother to daughter, but I could also mention vintage sports cars.
• ☝🏼There is a constant over-demand for luxury products (manufacturers keep supply artificially low, producing less than they could sell), a very good example of this is Ferrari, which could produce more than 13000 cars a year, but deliberately does not.
• ☝🏼this gives companies great pricing power (the premium of luxury is built into the product, it will be more expensive in itself because of the great power of the brand and this is coupled with scarcity)
• ☝🏼The list price of luxury items is almost always lower than the secondary market price (i.e., their price increases when they leave the store, unlike what happens with an average product, which decreases in price.) A very good example of this is the luxury watch market.
• ☝🏼The pricing of luxury brands is completely divorced from their real use value, here you have to pay for the desire to own and the prestige, not for the fact that it is an object of use
• ☝🏼Luxury items are also good as a type of investment, for example, the value of rare sports cars tends to increase

The market size was USD 259 billion five years ago, while this year it could grow to USD 382 billion. The next four years of growth could reach a CAGR of 5.4% per year and a market size of up to $419 billion, according to Statista. However, since this analysis was originally done in 2024, it is worth noting that continuous growth was expected, but this is not supported by the decline of Kering, LVMH and Richémont, as you will see later.

Some companies are expanding into other sub-segments for portfolio diversification reasons, e.g. Gucci not only produces clothes and shoes, but also participates in the accessories market, but the same is true for Burberry (BRBY), and they also sell cosmetics, while Hermès sells almost only luxury leather goods.

👌🏼Heritage, or the added value that can only be acquired over time, is very important for these companies, and it creates a barrier for new industry players and hinders market entry.

Most companies have a 100-year history, everything is made by hand, the entire distribution network is under control, and each company is usually managed by one family. Important, that the luxury market is a rather fragmented market, countless companies fight for supremacy in countless sub-segments, but no one has a decisive advantage, even the largest ones can only capture a maximum of 10% of the market. It should also be remembered that many family companies have not taken their companies public, so direct opponents should not only be sought on the open market. Some examples of private luxury companies:

• 🕴🏻Giorgio Armani: The eponymous founder recently passed away, and the brand has no stock market presence.
• 🧴Chanel: entirely owned by the Wertheimer family, private.
• ⌚Rolex: It is owned by a foundation (Hans Wilsdorf Foundation), completely private.
• ⏱️Patek Philippe: a Swiss watch brand owned by the Stern family, not listed on the stock exchange.
• 💍Chopard: A watch and jewelry brand owned by the Scheufele family, completely independent.

This is not true for conglomerates like Kering or LVMH, which typically incorporate the right brands into their portfolios through acquisitions, rather than through long-standing family heritage. Hostile acquisitions are quite common, with LVMH, and the “wolf in cashmere” Bernard Arnault, being the most prominent.

The individual subsegments of the industry can also be classified according to which brand falls into which category:

• 👗Luxury: most often conglomerates, no depreciation, excess inventory is destroyed (e.g. Burberry scandal), they control the entire supply chain, there is continuous over-demand for their products, production is in France or Italy. The customer base is older (30+), some products are passed down from generation to generation, they are mostly sold in physical stores, there are few listed products, there are no prices online.
  • Companies: LVMH, Richemont (Cartier), Hermès, Kering, Christian Dior SE (majority owned by LVMH)
  • Brands: LV, Salvatore Ferragamo, Dior, Prada, Chanel, Gucci, Bottega Veneta, Balenciaga (these three are Kering), Hermès, Giorgio Armani, etc.
• 👡Premium: half/third of the luxury pricing. Almost never a discount.
  • Companies: Moncler, Burberry (BRBY)
  • Brands: Moncler, Burberry (these are single-brand companies, where the brand and the company are one and the same)
• 👟Accessible: There is discounting, outsourced production in underdeveloped countries, online orders. It is also called masstige or affordable luxury.
  • Companies: Nike, Adidas, Puma, VF Corp, etc.
  • Brands: Levi's, Nike, Adidas, Michael Kors, Coach, Ralph Lauren, Tommy Hilfiger, Calvin Klein (both of these are PVH Corp.) Lacoste, Guess, etc.
• 👕Fast fashion: They copy the products of luxury industry players in low quality. Generation Z buys and mixes it with luxury, e.g. Hermès bag with a Zara dress;.
  • Companies: H&M, Zara, etc.

The above is very important because the Top ten players in the entire industry collected 56+% of the revenue and 76.4% of the profit three years ago, unfortunately I could not find a more recent study. From a value creation perspective, it is worth buying almost exclusively luxury industry players, because their capital yields the highest profit. This is true not only for the clothing industry, but also for car manufacturing; it is no coincidence that Ferrari (RACE) earns the most on its cars.

The COVID pandemic has shown how strong luxury brands are. The overall revenue drop in the fashion industry was 70%, compared to which LVMH raised prices by +8%, Chanel by +10%, Hermès by +6%, and by the end of the pandemic, Chanel had raised prices four times! in two years. It is clear that they have much greater retention power (8-10% annual price increase, plus 3-4% growth at fair value) than other competitors. What is the reason for this:

• ☝🏼luxury products are purchased by high-income individuals who are not really exposed to inflation
• ☝🏼Price increases are not necessarily a disadvantage, they are status symbols
• ☝🏼There is constant over-demand, so satisfying the pleasure of buying is the main driving force
• ☝🏼For them, price increases are almost irrelevant

🪆Luxury within luxury

In the previous Kering analysis, I mentioned that one of the big problems in the fashion industry is that it is very difficult to quantify the market. This is a rapidly changing environment, generating strong emotions that are relatively difficult to base your decisions on. However, as an investor, you still need to have some quantitative resources, so I will try to give you examples of where certain brands are positioned within the premium/luxury market segments.

It is a common misconception that luxury products are only purchased by the very wealthy. In fact, the luxury industry itself is built on a paradox:

• to sell a relatively high-priced, rare, prestigious product at a high price, which not everyone can afford
• to increase market size and volumes without compromising exclusivity

💡Interestingly, luxury goods companies do not collect a significant portion of their revenue from very high and ultra-high net worth individuals, who are often referred to by the acronyms VHNWI and UHNWI, but from the purchases of the upper-middle class.

There is a simple reason for this: They want to show the world how high their social status is, and that this layer is significantly larger than the top one percent, or rather one thousandth. This group is particularly prone to flashiness, meaning they look for products that immediately indicate that they are owned by a very wealthy person. However, in reality, this group only spends a few thousand dollars a year on luxury products, compared to those who are willing to spend millions of dollars a year.

Due to the above trend, the luxury industry has broken down into the following subsegments and developed its characteristics:

• 💎ultra luxury: Extremely high pricing filters out customers, such as Hermès, Ferrari, Rolex, Patek Philippe. Very low production numbers.
• 👜high-end luxury: This is what the upper-middle class buys, it is characterized by large, spectacular inscriptions, very easily recognizable logos that show that the owner is rich, just think of the double G letters of Gucci or the iconic LV print of Louis Vuitton. Brands that belong here: Louis Vuitton, Gucci, Prada, Dior, Chanel, Giorgio Armani.
• 🧥between luxury and premium: luxury aspirants, but with lower pricing, who imitate what the higher-end companies do, but do not have the pricing power to do so. They are available in significantly higher quantities than ultra-luxury products: Burberry, Moncler, Versace (Capri Holdings).
• 🥻niche luxury: are also expensive products, but organized around a specific feature or style. They are also very small in number. Examples include Loro Piana, Brunello Cucinelli (Mark Zukerberg's gray T-shirts cost $400), Loewe or Bottega Veneta (Kering). They are particularly common in the case of car manufacturers, e.g. Ruf Porsche (converted cars that are design masterpieces).
• 👖quiet luxury: It is a special segment, characterized by extremely high prices, but it is impossible to decide at first glance from the appearance which brand the product belongs to, only those who also own something like this will recognize it: Hermès, Brunello Cucinelli, etc.

Of the above, niche and quiet luxury require further explanation. Representatives of quiet luxury basically live at such a high standard of living that they don't need to prove their wealth. Therefore, they prefer products that are of high quality, but also clean and difficult to recognize. People who own Hermès Birkin or Kelly bags will recognize their counterparts, while those who have never owned one will not. In this standard of living, it is not cool to flaunt your wealth. In contrast, every second entertainer, such as rappers or footballers' wives, flaunts Gucci or Louis Vuitton accessories.

T-shirts made from Loro Piana vicuña wool, a quiet luxury, can cost up to $3000. These are completely unique garments with a traceable history, you can even see which sheep the material was sheared from. In fact, the t-shirt functions as a physical NFT, meaning that each piece is unique, which is what you have to pay for in the extremely high price.

💯Luxury quantified

The above is still very elusive, so let's quantify the concept of luxury a little. I took two examples, leather bags and T-shirts, and let's see how much each costs and which segment it belongs to:

Brand	Average price (USD)	Maximum price (USD)	Category
Burberry	1500-2500	~ 3000	On the border of premium/luxury
Gucci	1200-2500	~ 30000	Luxury
Versace	~ 2600 - 3800	~ 3800	On the border of premium/luxury
Louis Vuitton	1200-6000	12000-36000	Luxury
Hermès	4500 - 11400+	500000-10000000	Ultra luxury (Birkin and Kelly bags)

💡The current record for the most expensive leather bag ever sold at auction is tied to an exceptional piece, the original Hermès Birkin prototype used by Jane Birkin.

• This unique prototype, made in 1985, with a unique design, gold-plated washer buttons, closed metal rings and Jane Birkin's monogram, was sold at Sotheby's in Paris in July 2025 and fetched 8.6 million EUR (~10.1 million USD). It is the most expensive handbag ever sold at auction in the world.
• The previous record for the most expensive Hermès bag was held by a Diamond Himalaya Birkin, which sold for over $450000 three years ago.

Let's look at the prices for the most expensive T-shirts, which typically fall into the category of quiet luxury. Of course, not all of them, as products aimed at the lower-priced segment are also represented here.

Brand	Average price (USD)	Maximum price (USD)	Category
Sunspel	~ 110	~ 200	Premium
Merz b. Schwanen	~ 120	~ 220	Premium
The Row	200-600	~800+	Luxury
Gucci	300-600	~ 1200	Luxury
Saint Laurent	300-500	~ 1000	Luxury
BRUNELLO CUCINELLI	400-600	~ 2200	Luxury
Loro Piana	600-1000	~ 3200	Ultra luxury

Based on this, let's see where we can place the Burberry (BRBY) brand in the luxury and premium segment.

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🙋‍♂️The specialties of Burberry (BRBY)🙋‍♂️

In this section, I examine what specialties the analyzed company has, what its position is in the market, and whether it does anything differently than its competitors. If so, what and how, and what impact does this have on their operations.

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The company Burberry (BRBY) was founded in 1856 by Thomas Burberry. It is practically a single-brand company, where the brand name is merged with the company. I have heard several times about Burberry (BRBY) that it is a true English brand, whose colors and stripes are iconic, and it is not by chance that the style is called the Burberry pattern. Burberry's Scottish plaid pattern is a beige, black, red and white plaid motif, which has become the brand's trademark since the 1920s.

The brand's greatest invention is the gabardine material, which is waterproof and durable, and from this their famous storm jacket was born. Burberry's equestrian logo was born in the mid-20th century, the classic "equestrian knight" symbolizes tradition and nobility, but it has changed several times over the years. If you see a huge, blue and white charging knight in the big world, it will definitely be a Burberry (BRBY) store.

Burberry represents both the British rural heritage, such as raincoats, tweed jackets, timeless classics and London urban elegance. When I went abroad, I saw not only the coats and bags, but also Burberry patterned scarves, which also represent a kind of English style. It is a dominant premium brand not only in clothing, but also in bags, accessories and perfumes.

☝🏻However, it is worth knowing that it is relatively difficult to gain a foothold in a segment where switching costs are low and anyone can enter and exit the market with a clothing brand, unlike, say, the hard luxury subsegment, because not everyone will produce Swiss watches or Ferraris.

Burberry has a portfolio that includes luxury products, such as Burberry-style coats, premium items such as accessories, bags, and fast fashion items, such as T-shirts, sweaters, etc., so the overall picture is quite mixed.

Product	Average price (USD)	Maximum price (USD)	Category
Bag (e.g. Note, Lola, Pocket)	1500-2500	~ 3000	Luxury
Trench coat (classic gabardine storm coat)	2500-3000	~4000+	Luxury / Iconic
Scarf (classic Burberry check cashmere)	400-600	~ 1200	On the border of premium/luxury
T-shirt (with logo, basic piece)	250-350	~ 500	Premium
Perfume (Burberry Her, Mr. Burberry, etc.)	100-150	~ 200	Premium

The emphasis is on the words premium brand, I think Burberry (BRBY) is not a luxury brand, but rather a single-brand company teetering on the border between luxury and premium. This is a problem because Burberry's products are mostly purchased by members of the upper-middle class. What does this mean? If you are reading this article, chances are you know quite a few people who fall into this category. What does this mean in terms of wealth? The following:

🧑🏻‍💼Burberry (BRBY) is an upper-middle class brand

• This is more of a socio-cultural category, not a wealth definition.
• Typically a highly educated, stable and well-paid group (e.g. doctors, lawyers, engineers, company managers).
• Their net worth varies from country to country, but often hovers around a few hundred thousand dollars (in the USA, net worth per household is typically between 200000 and 1000000 USD).
• An apartment, retirement savings, a car, a stock portfolio, but not necessarily liquid assets, a lot of it is real estate.

📌In practice: The upper middle class represents 12% of the US population, 10-15% of society in Western Europe, and 5-8% in Eastern Europe. The upper-middle class typically spends a few thousand USD per year on premium or luxury products. At this level, price itself is a powerful filtering factor, for example, an entry-level Ferrari Roma, which costs $250-300000, is already beyond the capabilities of this category, but probably also a more expensive Birkin bag. However, Burberry (BRBY) products fit right into this price range.

👨🏻‍⚖️HNWI: high net worth individuals

• This is a stricter category already used in the financial sector.
• Official definition: minimum of 1 million USD in liquid, investable assets (other than real estate).
• Three subcategories:
  • HNWIMore: 1-5 million USD
  • VHNWI: 5-30 million USD
  • UHNWI: Over 30 million USD

📌In practice: from a larger fortune, it is possible to achieve a large fortune relatively quickly with savings alone, even investing the lower limit of 1 million USD and with an average annual return of 10%, a profit of 100000 USD can be achieved. It is not particularly difficult to figure out that you can easily buy a 2-3000 USD Burberry (BRBY) bag from this, but as you could see in the previous chapter, this is practically enough for all the above goods and is still very far from, say, a fortune of 30 million USD. In other words, the dividing line is somewhere here.

🧥Burberry (BRBY) vs. Moncler (MONC) price comparison

I'll show you one more interesting thing, and that's Moncler's pricing. As you can see, their prices are very close to Burberry's, practically direct competitors. This is the real premium category, you have to think in this price range.

Product	Burberry price (USD)	Moncler price (USD)
Coat / Jacket	Storm jacket: 2500 – 4000	Puffer jacket: 1200 – 3000 (limited: 5000+ USD)
Bag	1500-3000	800-1500
Scarf / Accessories	Cashmere scarf: 400 – 1200	Hat, scarf, gloves: 200 – 600
Polo	250-500	250-400
Sweater / Knitwear	600-1200	400-1000
Perfumes	100-200	Not selling

The above pricing is partly the cause of Burberry's (BRBY) current problems, as in 2022 the then CEO and creative director Daniel Lee shifted the brand away from the typical storm jacket direction towards the much more profitable leather goods and began to focus on bags, among other things. What they didn't take into account was the much stronger brand and names like Gucci, Louis Vuitton, and Versace. Burberry (BRBY) raised its prices so much that it was placed on the same shelf as Gucci with a lesser brand power, and people no longer bought their products for that price, so sales began to fall, which clearly shows the limits of the company's pricing power.

The new blue and white charging knight and the collection featuring this colorway were also created at this time, which made it hard to recognize Burberry (BRBY) stores, moving the company away from the beige, black, red and white checkered motif that had previously been its trademark. This could be attributed to a kind of identity crisis, as the company moved away from its roots and did not focus on segments like iconic storm jackets, where it was a market leader.

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💰How does Burberry (BRBY) make money and what market advantages does it have?

In this section, we examine what exactly the company does to generate revenue, what products and services it has, how indispensable they are. Does it have any competitive advantage (economic moat), how defensible is it, and whether the trend is decreasing or increasing, and what is likely to happen in the long term.

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Burberry (BRBY) is a clothing brand that also sells accessories, which accounts for 35% of its revenue. They have children's clothing and a minimal perfume exposure, but it's not really significant. Men's and women's clothing add another ~30% each (~60% in total). Burberry (BRBY) does a pretty good job of reporting the numbers and their breakdown in their quarterly and annual reports. You can see in the first image that 84% of their products are sold in their own stores.

Another good value measure is controlling the supply chain. Over the past 1-2 decades, Burberry has very closely controlled distribution and production, with non-owned stores selling the vast majority of Burberry's merchandise. This also means that maintaining your own store network is a significant expense, which is why growth was low, not much more than 5-6% per year. At least that's how it was until about a year ago:

• 2025 Q2: 418 stores (DOS, i.e. directly operated stores)
• 2025 Q1: 422 stores
• 2024 Q4: 432 stores
• 2024 Q3: 429 stores
• 2024 Q2: 422 stores
• 2024 Q1: 421 stores

As you can see, the number of stores has been decreasing since the end of 2024, as Burberry (BRBY) was forced to close some of its stores due to its poor results.

13% of revenue comes from the sale of listed products, which is quite low, in the case of Kering (PPRUY) the same is somewhere around 15%. The territorial distribution is quite even, but as you can see, they have outgrown the old continent, and most of the revenue now comes from Asia.

Based on the above, consumers still trust the iconic brand of Burberry (BRBY), it is a well-known name, but it is currently not selling very well. This is a general trend in the premium/luxury industry, with almost all competitors seeing revenue decline. The question is whether the economic downturn is the only reason for Burberry (BRBY) or whether the decline can be attributed to structural problems. The latter is a bit strange to talk about in the case of a single-brand company, but I will return to this issue later.

One thing is certain, brand heritage is a given, it is difficult to reproduce, and customers fundamentally sympathize with the brand's credo:

• 🌴 striving for carbon neutrality
• 🗳️responsible product manufacturing
• 👳🏻support diversity, gender equality, and more

The above does not, of course, provide the company with any competitive advantage, but the company still meets the minimum social responsibility requirements. Burberry has been involved in several minor and major scandals in recent years, the most famous of which was the “hot case” of 2018:

• 🔥The company admitted that it destroyed around £28 million worth of unsold goods, mainly clothes and cosmetics, in a single year.
• 🐦‍🔥The reason: they wanted to prevent the remaining goods from appearing cheaply, in outlets or on the secondary market, thus damaging the brand's exclusivity. Since luxury brands never, and premium brands only extremely rarely, reduce the price of their products, they decided to burn them.
• 🧯However, the public and the press reacted with enormous outrage, as the luxury brand, which carries the banner of sustainability, was simultaneously accused of waste, environmental pollution, and hypocrisy.

As a result of the scandal, Burberry officially announced in late 2018 that it would stop destroying its goods and instead seek recycling or charity channels. Since then, the brand has prioritized this issue in its sustainability strategy, including emphasizing circular fashion and carbon neutrality goals.

There were also smaller communication scandals, such as a hoodie with a rope hanger motif that was criticized at a 2019 fashion show, but the best-known and most talked-about case remains the arson scandal.

🏰Economic moat🏰

In this segment, I examined whether the company has any economic competitive advantage, which Warren Buffett referred to as the “economic moat,” which deters competitors from besieging the company’s fortress, i.e. its business, and taking its market. In this case, these could be the following:

• 🫸Cost/scale advantage: not significant. In the case of premium and luxury brands, although I am not saying that there are no economies of scale, single-product, lower-revenue companies also prosper. This is because fashion is more of an emotional issue, and it is not about high volume, but on the production cost side, a holding company can certainly squeeze out better prices due to the higher volume. However, it is worth knowing that since these are luxury products, the production cost of each product is relatively high due to the excellent materials, but the companies compensate for this with their high pricing power.
• 🫸Switching cost: not significant. There is nothing stopping a consumer from buying or mixing products from one or more brands, but it is difficult to reproduce brands. The higher a product is positioned, the stronger the effect of brand heritage can work, for example, a Birkin or a Kelly bag cannot be replaced by another.
• 🫸Network effect: there is no effect similar to platform businesses, but there is an indirect effect. In the premium and luxury segment, consumers tend to attach great prestige to products and copy each other. For this reason, when a cultural group or social class takes up a brand, such as Patek Philippe among rappers a few years ago, but we could also mention Rolex, Audemars Piquet or Richard Mille, then members of the group tend to copy each other.
• 🫸Intangible assets, know-how, trademarks: yes, most brands are protected by strong trademarks. Although I don't think these companies have extremely sophisticated manufacturing technology, making products by hand is a luxury that few manufacturers can afford. I think every luxury manufacturer can look back on a very serious history and heritage that is difficult to reproduce, and this is also the basis of customer trust. From this perspective, single-brand premium brands are in a worse position, because they either embody super luxury, like Hermès bags, and have brutal pricing power, or they have to be more diversified, like LVMH and Kering. Unfortunately, Burberry (BRBY) is neither.
• 🫸Barriers to entry: high. Because of the aforementioned, but mainly because it is almost impossible to reproduce a given brand. And building a new one takes decades, and it is very difficult for a no-name brand to steal serious fashion designers away from the big names. And some hard luxury products require significant technical knowledge, and Ferraris or luxury watches are particularly difficult to manufacture. In fact, the industry is more characterized by consolidation and hostile takeovers.

Based on the above, Burberry (BRBY) may have a narrow moat, as Burberry's iconic symbols and long-standing heritage are difficult to replicate. Unfortunately, the brand is nowhere near as strong as its luxury rivals, let alone ultra-luxury. The company is also not very well-capitalized, and long-term declines are bleeding Burberry out, as you will see in the next chapter.

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🎢Metrics of Burberry (BRBY)🎢

In this section, I examined what metrics characterize the company, how it stands on the revenue side, what margins it operates with, whether it has debt, what the balance sheet shows. I look for items that are extreme – too high debt, high goodwill, etc. - what return on capital the company works with, what its cost of capital is, how the revenue and cost sides are structured. I also examine trends, owner value creation, and how the company uses the cash generated.

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📈What is the S&P 500 yield?📉

Compared to previous analyses, I have introduced a new section to compare the metrics below. Since many people use the US stock market index as a benchmark and also buy S&P 500 ETFs, it is worth looking at what companies are doing in aggregate (of course, you should be happy if the company you are analyzing is outperforming these values).

S&P 500 2024 data:

• SP&500 revenue growth: +7%
• SP&500 profit growth: +10%
• SP&500 gross margin: 45%
• SP&500 net margin: 13%
• SP&500 ROE: 15%
• S&P 500 ROIC: 12%
• S&P 500 ROCE: 11%

I examined Burberry (BRBY) data in several breakdowns, in addition to the basic one-year interval, also semi-annually, since European companies issue semi-annual reports, but of course, due to their ADR registered on the American stock market, reports are also received quarterly. It is already clear from the first figure that even over a 10-year period, Burberry cannot be accused of their financial results rising like a rocket. Their revenue was already trickling down in the pre-COVID period, then rebounded in 2023, followed by another deep dive.

It is worth looking at the above revenue data in a semi-annual breakdown, where you can also see the numbers broken down by each segment. Compared to the maximum in early 2023, there was a significant drop in September 2024, and then, like a turnaround story, things seem to turn around, at least in a semi-annual time frame. Revenues essentially depend on three categories:

• accessories: ~35% of revenue
• women's clothing: ~30% of revenue
• men's clothing: ~31% of revenue

The remainder is made up of negligible children's clothing and licensed products.

In the image below you can see the regional distribution of revenues, with the Asian market being the most significant. The increase in March 2025 is welcome, the graph has negative numbers because it compares the numbers with the first half of 2024. In other words, the results have started to rise, but it is still not nearly satisfactory.

In the clothing industry, one of the most telling figures is the sales revenue per store, that is, how much turnover the boutiques generated compared to the previous period. This was practically in direct proportion to revenue, except that it does not include the turnover of listed products. The difference between the two is that the boutiques are owned by Burberry (BRBY), while the rest is sold by outlets. However, in this case, this is irrelevant, because demand for Burberry products has collapsed in both sales channels.

Of course, revenue movements alone do not tell you much about the quality of a company, so it is worth checking the margins as well. Unfortunately, the situation has not changed, you can see falling margins, the most frightening of which is the net profit margin, which has turned negative. The net profit margin is nothing more than the profit remaining after deducting all costs, depreciation, amortization, taxes and other things. If it is negative, the company is generating a loss with its activities, but the 1.1% operating margin is not encouraging either.

Let's draw the conclusions: if the gross profit margin has barely fallen, but the operating margin and net profit margin have also disappeared, then the problem is not that production has become terribly expensive, but primarily that consumers simply are not buying Burberry's (BRBY) products in sufficient quantities.

Let's break down the above a bit and add debt and interest coverage. This is important because if a company has high debt but its revenues are falling, it will be a double whammy, as interest coverage is increasingly less covered by the declining cash flow. If the company is downgraded, it will not be able to renew its loans either (data from the previous 12 months):

• 💰income: £2461 million
• 🤑profit: -75 million GBP
• 🫰🏼cash: £813 million
• 💸net debt: GBP 1110 million (~45% of revenue, no profit)
• 💶net debt/EBITDA: ~ 8.06
• 👛interest coverage, EBIT/interest: ~ 0.3

One thing is clear from the above, there is practically no interest coverage, the company's net debt is half of its revenue, while the profit indicators are negative. The big question is why the company hasn't collapsed so far?

The answer is that compared to the essentially debt-free state in March 2021, total debt increased from GBP 1362 million to GBP 1927 million, an increase of 30%. This was not the main reason for the significant increase in the net_debt/EBITDA value, but the net debt (which also takes into account cash) increased tenfold!, from GBP 101 million to GBP 1114. What does this mean? Cash ran out, which was also largely due to the collapse of EBITDA. This is exactly the double effect in the case of Burberry (BRBY) that I mentioned earlier, the increase in debt was compounded by the decline in revenue.

🧮What do ROIC and ROCE metrics show?🧮

ROIC – Return on Invested Capital – shows how efficiently the company uses its total invested capital to generate profit. Read more here.

• It shows the company's fundamental value creation capability.
• It filters out the impact of the financing structure.
• If ROIC exceeds the cost of capital (WACC), the company is creating value.

ROCE – Return on Capital Employed – shows how efficiently the company uses its long-term financing sources. Read more here.

• It measures the profitability of business activities.
• It does not take into account tax effects.
• A good basis for comparison between different industry players.

Indicator	What does it measure?	Who is it useful for?	When is it considered good?
ROCE	Total return on capital	Long-term investors	If higher than the industry average
ROIC	Return on invested capital	Equity investors	If higher than WACC
ROE	Return on equity	Shareholders	If stable and sustainably high

Burberry (BRBY) Ownership Value Creation

On the owner value side, I usually look at how the company uses the free cash generated. Basically, a company can do the following things with cash:

1. reinvests in the business (no cash)
2. reduces debt (on the contrary, it actually increases)
3. pays dividends (cuts its dividend to zero)
4. buys back shares (has no cash for it)
5. buys up other companies (does not buy up companies at all)

The above list gives you the gist, but I created a chart that also includes share buybacks and dividend payments. The chart below shows two things: first, except for the COVID period and the 2024 dividend cuts and share buyback suspension, Burberry (BRBY) has been a cash returner to its shareholders, as you can see in the purple chart. However:

• In the decade leading up to 2023, the number of shares decreased from 447 million to 379 million, a 16% decrease
• In 2023, the company still paid a dividend of ~5%, increased it by 8% in five years and by 16% in twenty years, the dividend rate was 0.61 GBP per share
• July 2024: both dividends and share buybacks suspended due to deteriorating financial balance sheet

🧠A thought for this: Anyone who bought the company at the bottom of the price, around GBP 5.75, could have done so with a dividend yield of 10.6%. Let's assume that the company's situation improves in the next few years and they return to the original dividend of GBP 0.61. Since the dividend tax on English stocks is 0%, the dividend yield of 10.6% practically matches the average yield of the American market. That's why I like to buy companies after a dividend cut, because if the thesis holds true, not only can you achieve a significant price gain, but the high dividend yield also makes it easier to hold. However, that's not the case here, but it's worth remembering the idea nonetheless.

Unfortunately, there's not much good to say about Burberry's (BRBY) value creation metrics either, they practically collapsed along with the other metrics. With Burberry's WACC somewhere between 8-11% and ROIC practically zero, the company has been destroying value for some time. I don't think the current situation will last for years, but it will certainly take a few quarters to reverse.

If things are so bad, why has the price of Burberry (BRBY) doubled since its low? The explanation is relatively simple, due to various efficiency measures. In practice, this means the following:

• 👛they launched the Burberry forward program, which will return them to their original roots and focus on their core values
• 👛they laid off roughly 20% of their workforce, about 1700 people
• 👛They implemented cost cuts of GBP 40 million. A further £100m in spending cuts have been planned over the next two years
• 👛14 stores closed

That is, they have started to improve their operational efficiency, which has improved their previous loss of -75 million GBP to -1 million GBP. Of course, the usual takeover speculation has started, with Burberry (BRBY) merging with Moncler, in which LVMH has acquired a minority stake. These are just rumors, you should never rely on them, but the point is that the reason for the improvement is mostly due to cost reductions, not higher profits.

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💵Burberry (BRBY) Acquisitions💵

In this section, I examine how acquisitive the nature of the company is and what impact each acquisition had on the life of the company, if any.

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Burberry (BRBY) is a single-brand company, so it's not hard to guess that they haven't had many acquisitions, at least not of other brands. However, they do have almost complete control over their own manufacturing and distribution chain, which means higher pricing power and strong control over their products.

There aren't many of these, but they did buy a few additional companies:

• ☝🏻2023 – Pattern SpA: Pattern SpA is a division of an Italian manufacturing company that produces samples and prototypes for luxury fashion houses, including Valentino and Gucci (distribution center and production capacity).
• ☝🏻2018 – CF&P, luxury leather bag business: Burberry has announced a strategic investment in the luxury leather bag business of Italian partner CF&P. While it wasn’t technically an acquisition but a strategic investment, the move was intended to give it greater control over its leather goods production. But that strategy has essentially failed by 2023.
• ☝🏻2017 – Coty: COTY has acquired exclusive, long-term rights to Burberry's entire beauty and fragrance business (Burberry Beauty). Coty previously owned the rights to Kering Beauté, but this reverted to the parent company.

As you can see, Burberry (BRBY) is not an acquisitive company, it prefers to make strategic agreements or strengthen its control over production.

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🤵Burberry (BRBY) Management🤵

In this section, I examine who runs the company and how. What is the bonus system, how much risk – skin in the game – do the managers take on while running the company? Is there a family connection, or perhaps a special “heritage” factor?

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Burberry is a company with a long history, its history dates back almost 160 years, it was founded in 1856, a real historical company. It was basically known for its breathable and waterproof materials. In the 1910s-30s, it still served the army, which is where the Burberry Check comes from, that is, the pattern, which is red-blue-gray checkered-striped on a sand-colored background. Their logo, the armored knight with a horse, dates back to 1901, but has been redesigned several times over the years. It really became a fashion brand from the 60s, but in the 70s it became a popular outfit for football hooligans, which greatly eroded the brand's reputation. 

The company had a relatively difficult time getting out of this situation, but the situation is quite classic in the luxury industry: the breakthrough was brought about by two personal changes, the replacement of the CEO and the creative director. These two people are particularly important among the players in the luxury clothing industry. On the one hand, they have to be able to cooperate well, and on the other hand, the creative director determines the image of the brand, and it depends on him whether the new collections will appeal to the target audience or not. I wrote more about this here: Kering Stock Analysis (PPRUY) – Gucci is not selling.

💡Burberry (BRBY) does not have a dual share structure or is not owned by any of the more well-known families like LVMH or Kering, most of their shares float freely on the market. This also means that institutional investors are the ones holding the paper, but none of them has a decisive majority. 

The glorious past:

• 2001-2018 – Christopher Bailey: Chief Designer (COO), legendary designer. who increased share prices tenfold in 13 years. Inventor of “Britishness”, created a unified brand image for Burberry (BRBY).
• 2006-2014 – Angela Ahrendts CEO: (best CEO in England in 2012), tripled BRBY's revenues.
• 2018-2022 – Ricardo Tischi, chief designer, replaced Christopher Bailey (COO), logo redesign, younger direction, focus on leather goods, which didn't go down well because this age group doesn't consume the brand's products, they had to compete with much stronger competitors, damaged image.

However, new times required new leadership:

🧑🏻‍💼Gerry Murphy – (Chairman of the Board of Directors)

• Gerry Murphy, of Irish-British background, has been chairman of Burberry since July 2018. He has extensive experience in corporate transformation and retail leadership. He also currently holds leadership roles at Tesco and Blackstone International (private equity).
• Remuneration: £447000.
• Shares held: ~£429000 worth.
• Murphy is assisted by 9 independent directors.

🙎🏻‍♂️Joshua Schulman – Chief Executive Officer (CEO)

• He took office in July 2024, succeeding Jonathan Akeroyd. He previously held senior management roles at Michael Kors, Coach, Jimmy Choo, Yves Saint Laurent and Gucci, among others. He is responsible for implementing the “Burberry Forward” strategy, which aims to revitalize the brand.
• Remuneration: total ~2.5 million GBP, ~1.2 million GBP base salary plus housing up to 10% of salary, plus annual bonus, plus Burberry share options, see below for exact details.
• Shares held: ~£427000 worth.

🪙Kate Ferry – Chief Financial Officer (CFO)

• Kate Ferry has been Burberry's CFO since July 2023. She has extensive experience in private and public companies, particularly in IPOs and transformations, including Burberry's IPO in 2002.
• Remuneration: GBP 0.907 million, on similar terms as the CEO.
• Shares held: ~£142000 worth.

👕Daniel Lee – Chief Creative Officer (CCO)

• He joined Burberry in September 2022, succeeding Riccardo Tisci. He rose to fame as the former creative director of Bottega Veneta, and it was under his leadership that the Fall/Winter 2023 collection was presented, as well as the return of Burberry's iconic equestrian logo.

In connection with the above, it is worth noting that the key leaders are almost all new, as they replaced the former managing director Jonathan Akeroyd, who is credited with pushing the leather goods products, as well as the CFO. The oldest key figure is Daniel Lee, who replaced Riccardo Tisci, and the 2023 collection is already under his name. This is the end of a successful period, and it is very typical for creative directors to be dismissed at such times, for example, this happened in the case of Gucci. What I really resent is that the management members don't really have a large shareholding in Burberry, practically it's not even equal to a year's salary. The compensation structure does contain such restrictions, but since they haven't spent enough time with the company, this hasn't been possible yet.

🤑Burberry (BRBY) Executive Compensation Structure

It is very important for every company that management is also interested in the long-term success. If this is not the case, a conflict of interest arises between the short-term goals of management and the long-term goals of shareholders. When is remuneration considered appropriate? Primarily when:

• 📈tied to company metrics and focused on internal value creation (KPI)
• 📋if a larger part of the remuneration comes from long-term incentives (LTI)
• 📊if the company's shares need to be held for a longer period (vesting period)
• 📉if the company performs poorly, salaries fall or bonuses are not activated

Typically, companies divide the bonuses for top managers into several groups:

• 💵basic salary: a fixed amount of monetary compensation, usually based on the price level of competitors.
• 🏘️Housing and other basic services: buying or renting a home, car, telephone, technical equipment, health insurance, pension fund, typically up to a cash limit.
• 📏Short-term incentives (STI): There are many goals that need to be covered in the short term. For example, ESG goals, equal opportunities, environmental protection, number of customers acquired, in fact, anything that the company identifies as a key metric. Short-term incentives can be many things, usually a larger annual cash bonus, sales commission or other performance bonuses, e.g. for successfully completing a project, etc.
• 🏃🏻‍♂️long-term incentives (LTI): it is good if it represents a significant portion of the salary and is tied to company metrics. I don't really like benchmark-based compensation because there is often room for bias in the case of arbitrarily put together benchmarks. It is advantageous if indicators related to internal rate of return, cash generation, margins are used, i.e., which are difficult to change in the short term from an accounting perspective. That is why many companies create 3- and 5-year averages of company metrics. A typical long-term incentive is a stock option or a cash fund from which the company's shares must be purchased. The longer you have to hold these, the better.
  • Restricted Stock Unit (RSU): After a specified period of time, managers receive actual shares.
  • Performance-based share awards: This is exactly what it sounds like, stock bonuses tied to the key metrics mentioned earlier.
  • Long-term cash bonus: It's rarer, but it does happen, especially if the company is not a listed company.

Not all companies use the above terms, but the terminology generally fits the above. In the case of Burberry (BRBY), let's start with a pretty telling image, CEO compensation:

What does the above image reveal? Pretty much everything, as the report lists line by line where the income comes from. Joshua Schulman receives 33% of his total salary from his base salary and 47% from his bonus, and he does not receive any stock. But how does this all add up? Let's take a look behind the scenes:

You can see the basic salary and other basic services mentioned in the first three rows, which were not adjusted in 2025, and there is no reason for it anyway. The annual bonus, which corresponds to the STI category, has not changed either, but the main point is clear from the table:

• 75% tied to operating profit
• 25% for the mysterious strategic objectives, which are otherwise detailed in the annual report.

BSP stands for Burberry Share Plan, from which the executives received nothing, quite rightly. If you look at why, the picture becomes clear:

• revenue: minimum of 3200 million GBP (although the revenue metric is not particularly telling, it is very good that management is encouraged to increase it, because organic growth is the engine of any company that prospers in the long term).
• ROIC: the return on invested capital should be at least 1% higher than the average cost of capital, i.e. ROIC > WACC. I wrote about this before, and the management failed miserably on this too.
• Fulfilling brand and sustainability aspirations: This includes quite a few goals, but here sales of certain sub-segments and other metrics are combined with sustainability goals.

In connection with the above, it is worth noting that failure to meet any of them means the loss of the entire amount, quite rightly so. However, the amount of the bonus has been increased, which means additional payment if the metrics are met. I think this is a very good decision, because this way the proportion of the total salary shifts towards the Burberry share program, which in turn requires performance. And in the last line there is the clause: they must invest 300% of their salary in Burberry shares and hold them for 2 years after their appointment is terminated. Of course, the above is formulated much more complexly, over dozens of pages. If you want to delve into it, you can do so here: Burberry Annual report 2024-25

☝🏻Overall, I think the incentives are strongly aligned to the company's interests, that's not the problem with Burberry (BRBY), it's the many other things I mentioned.

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🆚Competitors: Burberry (BRBY) rivals🆚

In this section, I examine who the competitors of the analyzed company are, what is their market position, whether they are in a subordinate, secondary or superior role. What is their market share and what is their specialty? Are they losing or gaining market share to their competitors?

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I'll start with the usual Morningstar chart, which I don't think is a good one anyway. Burberry's (BRBY) perfume and children's clothing divisions can be practically ignored because they contribute only marginally to revenue. The leather goods, apparel, and accessories segments remain the mainstay. Burberry (BRBY) is the market leader in the storm jackets subsegment, but that's not really a very big slice. That's why large conglomerates with perfume, beauty care, premium spirits, or hard luxury items like luxury watches or jewelry can be ignored as opponents.

I also find it important that Burberry (BRBY) is not really a luxury brand, so it can't really compete in quality with names like LVMH and Hermès, while Richémont is more strong in hard luxury brands.

Among monobrands, Moncler (MONC) stands out, while among companies owning multiple brands, Capri Holdings (CPRI) with brands such as Versace or Jimmy Choo. Tapestry brands like Coach, Kate Spade, and Stuart Weitzman are below Burberry's level, with roughly half the price tag. So in terms of quality, prestige, and price, Burberry (BRBY) is comparable to Moncler and Capri Holdings, if we don't count private companies.

Below you can see the revenue of the three companies, Capri Holdings is about twice the other, of course this does not say anything about its quality. The trend is decreasing in all three cases, but this is typical of the entire industry at the moment.

Looking at profit margins, it can be seen that while Burberry (BRBY) is losing money this year, Capri Holdings is not doing any better with its loss of -1115 million USD. Moncler, on the other hand, has been stable at roughly the same level for years, generating ~600 million USD in annual profits for the last three years.

A similar picture emerges on the value creation side, with Burberry and Capri Holdings' metrics collapsing, while Moncler's ROIC/ROE/ROCE values ​​are in the 17-22% range, which is certainly more than their WACC, or weighted cost of capital, meaning they are creating value for their owners.Of the three companies, Moncler (MONC) currently seems to be the healthiest, but obviously, without an in-depth analysis, you can't tell what a company is like. However, Moncler's valuation is also much higher than the other two, which also reflects the difference in quality.

But here's a thought to end with: In the fragmented luxury industry, the big fish eats the little fish thesis is very true, and it is worth buying only the highest quality companies. If you have even the slightest doubt that a brand does not fall into the luxury or ultra-luxury category, then I think it is not worth holding them in the long term. Since I do not consider Burberry, Moncler, or Capri Holdings to be luxury companies, their comparison is somewhat invalidated by companies like LVMH and Hermès, which represent true luxury. This pair is much less sensitive to changes in market sentiment, has much stronger capital, and is much easier to hold with a long-term investment perspective.

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⚡What are the risks of Burberry (BRBY)?⚡

In this section, I examine all the risks that could affect the company's long-term future. Currency, regulatory, market disruption, and so on.

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Regarding Burberry (BRBY), there is no question that the biggest risk is the poor product structure, the push for leather goods and the higher pricing, to put it mildly, which did not work. Since Burberry is a monobrand, if the brand works, it is good, if it does not, the company does not operate well, there is practically no brand diversification.

🎭Brand identity and positioning

• Heritage trench & check vs. leather goods focus, which didn't bring a breakthrough. That's why they launched the Burberry Forward program, which is a return to basics.
• Dilemma: classic British elegance or a streetwear trend, the risk of an identity crisis.

📌In practice: Looking back at Burberry's (BRBY) data over a period of roughly ten years, it can be seen that there was not really any growth in the company. They were probably forced to make a forced change of direction, as Burberry could not move down because it would have been a loss of prestige, and it could not move up because it did not have enough pricing power. Therefore, the company tried to turn to the much more lucrative leather goods, but in that segment it had to compete with much bigger names and companies with more capital, and it didn't work.

⭐Brand power and prestige

• It's not at the level of Hermès/Chanel/LV
• Weaker resale power in the secondary market, the prestige of their products is not high enough to create real demand pressure.
• The success of Creative Direction Shifts (Daniel Lee) is still uncertain

📌In practice: I think Burberry (BRBY) is a premium manufacturer that wants to position itself as a luxury manufacturer, but is too conservative to sell its products to young people. I have a hard time seeing how it can move from this position, of course a very creative director can help with this. The best example of Burberry's (BRBY) lack of brand power is how much Burberry items sell for on secondary markets, such as Farfetch or Vestiaire Collective. Let's look at their Lola bag, because it compares well with similar products from real luxury manufacturers:

• A new Burberry Lola bag costs around 1800–2200 USD in the official webshop, while it can be purchased 30–40% cheaper on resale sites like Farfetch or Vestiaire Collective.
• A classic storm jacket costs around $2500–3000 new, and often around $1000–1500 on the secondary market.

In contrast, a Hermès Birkin or Chanel Flap Bag, for example, often sells for more on the secondary market than a new one because demand exceeds supply. It's simply not prestigious enough to own a Burberry.

🌍Geopolitical and economic exposure

• High revenue weight from China and Asia, slowdown, closures, political risks.
• Brexit and tariff wars are increasing costs.

📌In practice: Brexit has not helped English companies and the pound, to put it mildly. Since the UK is no longer a European Union country, they do not facilitate product sales, most customs agreements have been terminated, and their products are currently subject to a 10% tariff towards America.

Regarding the Asian market, I wondered when, for example, Chinese residents will get to the point where they can create their own brands, similar to electric cars? Obviously, it is much more difficult to establish a prestige brand from scratch, but somehow I find it difficult to imagine that in most Chinese cities, people buy dozens of storm jackets because the weather is simply not English. Burberry is not luxurious enough to make a splash in the perfume, accessories or leather goods segments.

🌱Sustainability and reputational risks

• 🔥The 2018 "burning scandal" damaged the brand's image in the long term.
• 🌴ESG pressure: ethical supply chain, sustainable materials, any mistake could bring another reputational crisis.

📌In practice: I think Burberry (BRBY) is particularly good at this, as it has already "burned" itself with some serious scandals. Reading their annual report, they take environmental protection, women's rights, and workplace equality very seriously. They got the slap in the face in 2018, and they haven't destroyed any products since then, and I think this poses a significantly lower risk today than in the past.

👟Changing consumer trends

• 📱Gen Z and millennial shoppers are quickly switching between their favorite brands.
• 🏇🏻The quiet luxury trend doesn't suit the logo-laden, checkered Burberry.

📌In practice: The two effects above are happening at the same time. Gen Z and millennials don't wear Burberry (BRBY) much, even though iconic films like Gentlemen brought back the Burberry-like plaid and striped design. By the way, who made those clothes? Lonsdale, not Burberry, even though that film was very popular with the younger generation.

The other thing is that although English country wear is a style that is fixed to a certain place, adorned with iconic motifs, I find it hard to imagine it not remaining territorial. Since it has a very distinctive look and the Burberry logo is also present on it, it doesn't fit into the quiet luxury trend either. It's not subtle enough and not exclusive enough for that.

🧑‍💼Management and strategic changes

• Frequent CEO and CCO changes, lack of strategic continuity.
• The question is, will Joshua Schulman's new strategy work?

📌In practice: The matter speaks for itself, we don't really know what the company's management's implementation practices will be, but previous changes in direction suggest haste. Daniel Lee's collections have been on the market since 2023, yet sales are in a slump, even though the impact of a creative designer is usually noticeable within 5-6 quarters, but here much more time has passed.

💷Financial and capital market risks

• Dividend payments stopped in 2024.
• GBP exchange rate fluctuations have a strong impact on revenue.
• High fixed costs, maintaining the largest, most prestigious stores is dangerous in a recession.

📌In practice: The financial risks are actually the result of the previous ones, the other risks are manifested in the extremely weak numbers. Don't let anyone be fooled by the price movement, this is primarily the result of more efficient operational execution, meaning it is the result of cost cuts, layoffs, and dividend cuts, and not a rapid increase in the brand's popularity. The big question is how well the company will be able to survive with such a debt level. A weak balance sheet is almost always a huge risk if revenue and profits fall at the same time.

I made a self-check list that confirms the thesis about the company:

1. low or zero debt: YES/PARTLY/NO
2. significant economic benefit that can be protected in the long term: YES/PART/NOT
3. excellent management: YES/PART/NOT
4. excellent indicators, significant owner value creation: YES/PARTLY/NO
5. the majority of the total return comes from the reinvestment of generated cash, not from dividends: YES/PARTLY/NO
6. appropriate company valuation: YES/PARTLY/NO

As you can see, there is not much good to say about Burberry (BRBY), there are a lot of uncertainties. The management is trying to turn the company around, while the prestige and financial stability of the brand have been questioned. They have suspended their previous dividend and share buyback, and their products are not selling. Their situation is a bit similar to Keing (PPRUY), except that it is a much more diversified and higher quality company. I would not bet big on Burberry at the moment, and at this valuation, an acquisition could even be in the air. They are also talking about Moncler and LVMH entering the picture. This is a lot of uncertainty for a financially weak company, and not a good sign if you want to hold a stock for the long term.

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👛Burberry (BRBY) Valuation👛

In this section, I will examine the company's current valuation compared to historical values ​​and consensus fair values.

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Rating metrics

In the two rows below you can see valuation metrics. The first row shows the current valuation, the second row shows the historical valuation. Although I don't think these metrics are particularly good - they hide a lot - they can be used as a benchmark.

• Share price (2025-09-07) 12.27 GBP; P/E: -59; EV/EBITDA: 14.3; P/FCF: 14.3 (Based on Finchat.io)
• Historical median valuation (10-year average): P/E: 21.4*; EV/EBITDA: 10.65; P/FCF: 16.65 (Based on Gurufocus, P/E 15-year average)

Why don't you see a DCF model in this segment? Because each input data produces a huge variance in the output, and most of the data is an estimated value. Therefore, the valuation will never actually be a single exact number, but rather a range can be defined where the current valuation falls.

You should apply a margin of safety to this price range, according to your risk appetite. 

So don't expect an exact price, no one can say this for a stock. However, there are fair value prediction services, almost every major stock screening site has one, I've aggregated them below. However, if you want a good stock support service, subscribe to The Falcon Method (The Falcon Method), entry prices are given for the stocks analyzed there.

Rating (The ticker ratio of BRBY to ADR BURBY is 1:1)

• Wall street estimates: 6.73-15.72=11.25 GBP (I took into account the Alphaspread, the average of the two extreme values:)
• Peter Lynch Median P/E: £15.82
• Morningstar: £13.7 (3 stars)
• Gurufocus: £13.9
• AlphaSpread: GBP 10.34 (% overvaluation compared to base case)
• SimplyWallst: £21.65

Average (based on 6 reviews): £14.4 (15% underrated)

How to interpret the numbers? The above "margin of safety" rule should be applied according to your convictions, so if you really believe in the company, you can buy it at fair value, but if you proceed in 10% increments (whose convictions are strong), the math would look like this:

• 10% margin of safety: 14.4*0.9=£12.96
• 20% margin of safety: 14.4*0.8=£11.52
• 30% margin of safety: 14.4*0.7=£10.08
• 40% margin of safety: 14.4*0.6=£8.64
• 50% margin of safety: 14.4*0.5=£7.2

Of course, the list could be continued indefinitely, but the point is that the right purchase price for you is determined by the degree of your conviction.

🧮What is NOPAT Yield?

I barely mentioned NOPAT yield in previous analyses, but it's worth getting to know this indicator. NOPAT stands for Net Operating Profit After Tax, so one of its biggest advantages is that it filters out distorting accounting items, such as:

• the descriptions: are one-off in nature, often occurring during a crisis (e.g. store closures, inventory write-downs, goodwill impairment). These greatly distort net profit, while not necessarily affecting long-term operations:
• depreciation and amortization (D&A): accounting items, not involving cash expenditure, often represent very large amounts (e.g. in the case of goodwill, intellectual property of luxury brands), and do not necessarily reflect actual operating cash flow. Remember the EBITDA indicator? This stands for Earnings Before Interest, Tax, Depreciation and Amortization, so it includes items that NOPAT does not, and also shows a pre-tax situation.
• cash and debt: to calculate the NOPAT yield, you also need the value of the company, which includes the capital from external sources, i.e. debt. This is important because the value of the company is in the numerator, i.e. if the company has no debt adjusted for cash, you will get a higher value for the NOPAT yield, i.e. the company will be cheaper. This is also important because companies burdened with debt not only indirectly degrade the valuation ratio, but also run extra operational risks.

In the graph above you can see the NOPAT return, as a percentage. The scale is a bit wrong because it shows the numbers relative to 100%, a value of 0.01 means 1%. What can you see in the graph? The NOPAT generated relative to the value of the company. The final result will be a percentage value, the higher the better. In other words, the 9% a year and a half ago is extremely high, while the current rate of around 1% is very low, yet according to some metrics Burberry (BRBY) seems undervalued, but I don't think it is. Of course, this is also due to the rebound in the price, but it doesn't matter from your point of view: it is better to avoid value-destroying, expensive companies.

Although I suspected that there would be no big surprises in the EVA data provided by Interactive Brokers, I looked at the graph anyway. The data is unfortunately quite old, but it is still telling at this time. The blue column shows the capital employed, and the red column shows the added value, the relationship between the two shows how much value the capital employed creates. In this case, nothing, since the red value shown on the graph is below the zero line, which means value destruction. The market expectation is not zero either, so the stock is still expensive, and it is also clear that Burberry (BRBY) is currently only burning its capital.

☝🏻In light of this, Burberry (BRBY) is neither cheap nor a good buy, and its valuation has already rebounded from its lows. Investors are pricing in Burberry to emerge from the pit and prosper. 

So you will not only overpay for the company itself, but also for market expectations. This is a terrible risk/reward ratio, and you can find countless better buys in the luxury industry.

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🌗Significant news and the last quarter🌗

In this section, I will examine what happened in the last quarter, whether there were any significant news/events. If the company reports semi-annually, we examined this period.

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Bureberry (BBRY) reported its last quarter in July 2025, which the company itself has designated as the first quarter of 2026. As a European company, they officially publish semi-annual reports, but due to the ADR, they also have a quarterly report. The news below covers the events of the entire first half:

📊 Burberry (BRBY) 2025H1 key financials

• 📈Revenue generated in own stores (i.e. not outlet): GBP 433 million, down 6% year-on-year and down 2% at constant exchange rates (so Burberry is supported by the relative strength of the GBP against the USD)
• 🏪Comparable sale stores: -1% year-on-year, but a significant improvement compared to the previous quarter, where it was -21% year-on-year (so I could write it as +20%, but it's still negative)
• 🌍Regional performance:
  • America: + 4%
  • EMEIA (Europe, Middle East, India, Africa): +1%
  • China and its surrounding area (China, Hong Kong, Macau, Taiwan): -5%
  • Asia and the Pacific (Japan, South Korea, Southeast Asia, Australia, New Zealand): –4%
  • Total at group level: -1%

📌In practice: The above numbers are misleading, as they typically compare the numbers to the same half-year/quarter of the previous year, but 4 quarters have passed since then, and the situation has started to improve. Don't be fooled by the fact that you see negative numbers in most places, as we have gone from very negative to slightly negative. However, there is no reason for great optimism, Burberry (BRBY) is practically struggling to break even, serious profitability is still a long way off.

✨ Key highlights and strategic steps

• Campaigns and product selection:
  • Strengthening the “Timeless British Luxury” brand expression with monthly thematic campaigns (High Summer, Highgrove, Festival)
  • Reimagined Autumn 25 collection: highlighting iconic elements, fewer but powerful ideas.
  • Redesigning the look of stores: better visual product sales. For example, the scarf stand, where consumers can choose between accessories that look good to them, is doing well, and 200 units are planned by the end of the year (this is just a test for now to see if it is worth introducing globally, in all stores).
  • Online sales: The third quarter is continuously improving, product mix and changed style are improving the result.

📌In practice: Daniel Lee's new collections are coming to the market, and their essence is to try to bring the brand back to its original foundations. That is, to strengthen the English sense of life, Britishness, and to boost sales of clothing items such as storm coats, scarves, and the like. The look of the stores, services, and the like are being adjusted to this. The company is moving away from its previous focus on leather goods, and is not competing with much larger and stronger competitors.

💷 Cost reduction and future direction

• Cost-effectiveness program: The target is to achieve annual savings of GBP 80 million by 2026, of which GBP 24 million has already been achieved in 2025.
• Restructuring cost: £50m in 2026 (so in order to save, you have to spend first, which dampens the impact of the figures above).
• Capital cost: £130 million by 2026.
• Reorganization and downsizing: Layoffs of 1700 workers as part of cost-cutting.
• Simplification of structure, involving regional presidents in operational decision-making.
• Selling listed products (wholesale): A decrease in volume of around 15% is expected in the medium term, in the first quarter of 2026.
• 14 stores closed in one year (they didn't talk about this much, but their statements include the decreasing numbers)
• Burberry (BRBY) dropped out of both the UK FTSE 250 index and the FTSE 100 a year ago, after a decade and a half. However, as the company strengthens, it will soon return to the FTSE 100 index.

📌In practice: It's important to understand that Burberry (BRBY) not only needs to increase sales, but also reduce costs, obviously the latter being the easier and more certain. That's why they laid off 20% of their people, cut spending, and closed underperforming stores.

Management comments:

• "Turning now to the outlook for full year 2026. We are still in the early stages of our turnaround, and the macroeconomic environment remains uncertain. In the first half, we're continuing to prioritize investment and expect to see the impact of our initiatives build as the year progresses. We will deliver margin improvement this year as we build on the early progress we've made in reigniting brand desire. We remain confident that we are positioning the business for a return to sustainable, profitable growth.” —Kate Ferry
• "During the period, we continued to bring our timeless British luxury brand expression to life through a series of distinctive monthly campaigns, High Summer, Highgrove and Burberry Festival, each celebrating British summertime traditions while designed to speak to different customer archetypes.” —Kate Ferry
• "Globally, the Chinese customer group performed in line with the region. Asia Pacific saw a 4% decline, driven by Japan, which declined by 10% following a slowdown in tourism. This was partially offset by South Korea as the region returned to growth, up 2%. Moving on to brand initiatives. We kicked off the quarter with our high summer campaign led by Jack Draper and Rosie Huntington Whiteley.” —Kate Ferry
• "Australia and New Zealand. In Q1, we saw reduced activity by tourists globally, and traffic remained challenged. That said, in the Americas, we experienced 4% growth, supported by new local customer growth. EMEA grew 1% with local spend up mid single digit percentage, which helped to offset the decline in tourist spend. Greater China was 5% lower in the quarter with Mainland China down 4%.” —Kate Ferry

The lack of tourists is consistently mentioned not only by Burberry (BRBY) in Q's reports, but also by Kering (PPRUY), for example. One reason for this is that in Japan, due to the weak yen, the prices of many luxury goods were very low, so many people bought Gucci bags at the airport in Japan. Obviously, this caused the consumption of such products to fall in China and other parts of Asia. Of course, you can't sell an infinite number of bags in Japan, the market was saturated, so after a while, sales also started to fall.

Overall, I find the measures to be in order, but the big question is whether Burberry (BRBY) can return to where it was two years ago, when the company was able to generate a quarterly profit of GBP 370-490 million, now it is roughly zero. So it is clear that cost cutting can bring the company back to the minimum profitability range, but sales must return to the appropriate level for Burberry (BRBY) to shine in its old glory.

Next report: 2025.11.13

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✨Other interesting facts about Burberry (BRBY)✨

Everything that was left out of the previous ones, or if there is any special KPI - key performance indicator - or concept that needs to be explained, is included here.

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Artemis Investment Management LLP: a fund that owns roughly 5% of Burberry (BRBY), but has nothing to do with Kering's parent company, Groupe Artémis, which is the Pinault family's holding company.

RepTrak 100: The RepTrak 100 is one of the world's most recognized reputation rankings, produced annually by the RepTrak company. The list measures how consumers, customers and the public perceive the world's leading companies based on criteria such as reliability, sustainability, ethical behavior, innovation, leadership, and quality of products and services. The 100 companies ranked are evaluated according to the highest reputation scores, making the RepTrak 100 a global barometer of trust and brand value that carries great weight in the eyes of investors, customers and employees. The Burberry Group ranks 37th on this list this year. Of course, there are other industry lists that are similar to RepTrak, such as the Lyst Index, which only takes into account fashion companies. In this one, Loewe is first, Gucci is in 17th place, and Burberry is not in the top 20.

🔑Key Performance Indicators (KPIs)🔑

Same store sales: shows whether sales at Burberry (BRBY) boutiques increased or not, comparing two periods. It is a typical retail indicator, but it can also be used for companies operating in the premium/luxury industry.

Warehouse rotation speed: This indicator indicates when sales are slowing down, as the warehouse turnover rate decreases and the amount of money in inventory increases. Most clothing manufacturers tend to reduce this with promotions, but in the premium and luxury industries, discounts are prohibited, which can cause inventories to become stuck. The turnover rate is a great indicator of how quickly a company's products are being sold. The value below is not considered bad, in the premium and luxury industries it is usually between 1.5-3, for mass brands like Zara it is 4-6/year, while in retail, such as food, it can be as high as 8-15/year.

Basis of comparison:

• Prada: 1.2 years (293 days)
• LVMH: 1.2 years (308 days)
• Hermes: ~1.8–2/year (195 days)

The turnover rate is also called DIO, which shows the number of days spent in the warehouse, in the case of Burberry (BRBY) it is 179 days, which is slightly higher than 2/year turnover.

Revenue, profit and associated margins: Burberry (BRBY) has implemented major cost cuts, but this is unlikely to improve margins. Revenue and margins need to recover within a few quarters, otherwise it will probably be said that the plan is not working.

Burberry (BRBY) Summary

Summary of the analysis, drawing lessons.

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Burberry (BRBY) is fighting for its life like a wounded animal, and things seem to be turning around, which the market has rewarded with a price increase of more than 100% compared to the lows. This, in turn, meant that the valuation of the not-so-strong company shot up very high, while in the current situation the company is unable to generate a profit, which is a very poor return/risk ratio. What led to this? Mostly management mistakes, as Burberry (BRBY) ventured into an area where they had to compete with much higher-positioned and much more capital-rich companies in the leather goods subsegment, which shifted the focus away from core values. Where Burberry is strong is in storm coats and typical accessories that are considered quintessentially English fashion, such as scarves and sweaters. The company has realized that they need to return to their roots, and this is happening now, creating a typical turn around story.

It is also a big question to what extent Burberry (BRBY) is considered a luxury player. I don't think it is, it is more in the premium category. This means that it is much more exposed to market cyclicality, and has many more upper-middle class consumers than really rich ones. And in the luxury industry, you can also find better quality companies than Burberry (BRBY), such as LVMH, Hermès or Richemont. Burberry (BRBY) is currently suffering from two problems at once: poor quality and high valuation, so for me this company clearly falls into the category of a bad buy.

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Frequently Asked Questions (FAQ)

What you need to know about Burberry (BRBY)?

Burberry is a British luxury brand founded in 1856 by Thomas Burberry. The company is best known for its elegant clothing, accessories and iconic coats, particularly the trench coat. The company is listed on the London Stock Exchange (LSE) under the ticker BRBY and operates as one of the world's leading premium fashion brands, continuously combining tradition with modern fashion.

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What does Burberry's knight in armor represent?

Burberry's Equestrian Knight Logo symbolizes the brand's values ​​of elegance, quality and timelessness. The knight represents the company's historical traditions and British heritage, while emphasizing the brand's premium status in the fashion world.

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What is Burberry check?

The Burberry check, or distinctive check pattern, is one of the brand's most recognizable trademarks. Originally appearing as the inner lining of storm jackets, it has since spread to accessories and clothing. The check pattern reflects Burberry's commitment to luxury and style and has become an instantly recognizable symbol of the brand.

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Who are Burberry's competitors?

Burberry's main competitors are global luxury brands such as Gucci, Prada, Louis Vuitton, Chanel and Hermès. on paper. In reality, Burberry could be placed a notch lower, more like a rival to Moncler or Versace. Of course, true luxury conglomerates do not have their entire portfolios made up of luxury goods, but even they have more pricing power than Burberry.

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Is Burberry a luxury company?

No, Burberry is more of a premium company, offering clothing, accessories and perfumes at prices above average but below luxury. However, the exception to their portfolio is the storm jacket segment, which can cost up to $10, where they are the market leader. The brand combines quality, exclusivity and British heritage, aiming to provide high prestige and timeless fashion.

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What are Burberry's iconic products?

Burberry's most iconic products include trench coats, plaid scarves, handbags and accessories such as wallets and umbrellas. These products embody the brand's style and heritage, making Burberry a uniquely recognizable luxury brand.

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Which broker should I choose to buy shares?

There are several aspects to consider when choosing a broker - we will write a complete article about this - but I would like to highlight a few that are worth considering:

• size, reliability: The bigger a broker, the safer it is. Those with a banking background – Erste, K&H, Charles Schwab, etc. – are even better, and well-known brokers are typically more reliable.
• expenditures: Brokers operate with various costs, such as the account management fee, the portfolio fee - which is the worst cost -, the purchase/sale fee and the currency exchange cost (if USD is not deposited in the brokerage account)
• Availability of instruments: It doesn't matter which broker has which market available, or whether they add the given instrument upon request and how quickly.
• account type: cash or margin account, the latter can only be used for options. For Hungarian tax residents, having a TBSZ account is important, but citizens of other countries also have special options – such as the American 401K retirement savings account – which are either supported by the broker or not.
• surface: is one of the most underrated aspects, and it can be a real pain. Anyone who had an account with Random Capital, a now-defunct Hungarian broker, knows what it's like to work on a platform left over from the 90s. Erste's system is lousy slow, Interactive Brokers requires a flight test, and LightYear believes in simple but modern solutions.

Based on the above, I recommend the Interactive Brokers account because:

• the world's largest broker with a strong background
• a few million instruments are available on it, and shares listed on multiple markets – e.g. both the original and the ADR – of a single share are often available
• Interactive Brokers a discount broker, they have the lowest prices on the market
• you can link your Wise account to them, from which you can quickly transfer money
• Morningstar's analyses are available for free under the fundamental explorer (good for analysis)
• EVA framework data is available under fundamental explorer (useful for analysis)
• they have both cash and margin accounts, Hungarian citizens can open a TBSZ
• you can use three types of interfaces: there is a web and PC client and a phone application

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Legal and liability statement (aka. disclaimer): My articles contain personal opinions, I write them solely for my own entertainment and that of my readers. The articles published here do NOT in any way exhaust the scope of investment advice. I have never intended, do not intend, and am unlikely to provide such in the future. What is written here is for informational purposes only and should NOT be construed as an offer. The expression of opinion is NOT in any way considered a guarantee to sell or buy financial instruments. You are SOLELY responsible for the decisions you make, and no one else, including me, assumes the risk.