I'm LongbridgeAI, I can summarize articles.Burberry shares fell 7.3% despite reporting 5% same-store sales growth in Q1, driven by a 12% surge in the Americas. However, declines in Europe and the Middle East, along with Asia-Pacific results below expectations, raised concerns about sustaining the turnaround. CEO Joshua Schulman's strategy focuses on inventory reduction and core products, but analysts warn future margin improvements depend heavily on continued sales growth as cost-cutting measures are largely exhausted.
Burberry Group Plc (BURBY), a British luxury fashion brand known for trench coats, scarves and other outerwear, reported 5% same-store sales growth in the first quarter ended June as every product category expanded for the first time in three years. The result was broadly in line with analyst estimates, while sales in the Americas increased 12% and comfortably exceeded expectations. However, sales declined across Europe and the Middle East, raising questions about whether Chief Executive Officer Joshua Schulman can maintain the pace of the company's two-year turnaround. Burberry shares fell as much as 7.3% in London before reducing their losses, giving back gains from the previous two days that had been supported by optimism over rival Richemont's stronger performance in China and the US.
Schulman's recovery strategy has included reducing inventory, lowering prices and shifting attention back toward Burberry's signature products. The company has also improved product displays through measures such as mannequins and scarf bars, which have helped attract both returning and new customers. Burberry highlighted demand for its rainwear and said its Portraits of an Icon campaign, featuring celebrities including Teyana Taylor and Wu Lei, had brought new shoppers to the brand. The company has also expanded its seasonal offering through a swimsuit collection with British label Hunza G and fragrance pop-ups, while Schulman told analysts that Burberry is benefiting from what he described as a deliberate product strategy.
The next stage of Burberry's turnaround could become more difficult because the largest profit-recovery measures, including cost resets, are now largely behind the company, according to Jefferies analysts led by James Grzinic. This may leave future margin improvement increasingly dependent on stronger same-store sales growth. Gen Z customers in China have been purchasing Burberry products, while sales in South Korea increased 11% during the quarter. However, Asia-Pacific growth came in below expectations as Japan received fewer tourists from China, while Europe and the Middle East declined 3%, more than analysts had forecast, partly because the Middle East war reduced tourism spending. Although the Middle East represents roughly 2% of Burberry's sales, investors may remain focused on whether stronger product demand and a planned Milan store opening in 2028 can support the company's longer-term recovery.