UK shares: Burberry turnaround on track but shares punished

Burberry shares tumbled to the bottom of the FTSE 100 after its fiscal 2027 Q1 trading update but that should not deflect from a very positive quarter as sales growth momentum returned.

Sales rose 5% in the quarter from a year ago with revenues rising to £455mn, driven by strong growth in China and the US, while Europe was a good deal softer. Sales growth broke down as follows - China +9%, Americas +12%, EMA –3% and Asia Pacific +3%. The 5% growth matches the expansion seen in Q4 of fiscal 2026.

The Burberry Forward strategy is paying off and brand campaigns are delivering. For instance, management cited the Portraits of an Icon campaign for driving a 19% increase in Rainwear customers, while it saw double digit growth in Gen Z customers – hardly the easiest to please. "For the first time in three years, we saw growth across our Womenswear, Menswear, Accessories and Childrenswear divisions, anchored by the outperformance of Outerwear. Our strategy is working," said CEO Joshua Schulman.

Looking ahead to FY 2027 the brand said it will make further progress on revenue growth and margin expansion "in line with expectations". I think the market was probably looking for a bit more clarity and the failure to deliver some more detailed guidance and maybe raise expectations for the first half of the year is arguably what's behind the share price decline. Given the geopolitical situation it's not a surprise management are cautious and they are "mindful" of the uncertain geopolitical and macro-economic environment impacting consumer confidence. Although management was coy about retail sales guidance they did forecast wholesale to grow by a "high single digit percentage" in the first half.

There are good signs that the turnaround strategy is working with these numbers. Clearly there are concerns about Europe and Middle East sales but this is chiefly down to the US—Iran conflict. While this is obviously a near-term headwind to overall sales growth (EMEA is about a third of group sales) it does not mean the brand turnaround is floundering here. Moreover, the strength of sales in China and the US indicates underlying strength.