Burberry swings back to profit as shoppers tire of luxury’s steep prices

Burberry has found a way to make money from the one thing luxury shoppers have run out of: patience with ever-higher prices. The British trench-coat maker swung back to a profit for the half year, and its chief executive, Joshua Schulman, credited a ladder of prices that starts with cotton-cashmere socks and silk scarves and climbs to leather coats costing thousands of pounds.

That ladder matters to anyone who has never owned a Burberry share. For years the big fashion houses met every slowdown by raising prices again, and many aspirational buyers walked away. “Luxury customers around the world are experiencing some fatigue with exorbitant pricing,” Schulman told the Guardian, adding that Burberry’s “great value for money” was resonating strongly with Chinese customers.

Profit more than triples on smaller tickets

In the six months to late September, revenue rose 6% to £1.1 billion and comparable retail sales grew 4%, the fifth straight quarter of growth after a long slide. Adjusted operating profit more than tripled to £62 million from £19 million, and the group made a pre-tax profit of £19 million against a £48 million loss a year earlier, according to its interim results. Shares jumped about 8% in early London trading, the PA news agency reported.

The price list explains the strategy. In Britain, socks start at £85 and scarves at £195, while the top leather coats and bags pass £9,000, Schulman said. Outerwear grew by double digits, led by lighter “tropical” gabardine trench coats, and revenue from department stores and other wholesale partners jumped 17%, a sign that the shops stocking Burberry are ordering more of it.

The Americas and China pull ahead while Europe shrinks

Comparable sales rose 12% in the Americas, driven by local customers, and 7% in Greater China, where local spending and travel within Asia made up for fewer long-haul trips. The region covering Europe, the Middle East, India and Africa fell 2%, hit by fewer tourists and weak traffic at outlet stores; excluding the Middle East, the drop was 1%. Japan slipped as visitors from mainland China stayed away. The prices quoted here are UK prices and differ by country.

A thin margin and a cash drain behind the profit

The recovery is real but small. An adjusted operating margin of 5.7% leaves Burberry earning less than six pence on every pound of sales, and part of its gross-margin gain came from a one-off supply chain rebate. Free cash flow was negative £147 million, almost three times the outflow of a year earlier, as the company rebuilt stock ahead of Christmas, which it says is on plan. The cheaper-entry strategy also carries a risk of its own: a brand that sells more socks and scarves has to keep its coats feeling worth £9,000. Schulman conceded that “nobody has a crystal ball” about when wealthy shoppers will spend freely again, calling luxury “a very cyclical business”.

Staff have paid for part of the turnaround. Restructuring costs, mostly redundancies and consultancy fees under the Burberry Forward plan, fell to £8 million from £37 million. Schulman drew the contrast with rivals himself, saying Burberry “has always had a somewhat more democratic approach than some of our European peers”.

The boardroom also changed hands on results day: Gerry Murphy retired as chair and William Jackson succeeded him on 12 November. Burberry expects revenue growth and a wider margin for the full financial year. Its third-quarter trading update, which covers Christmas, is due on 21 January 2027, and it will hold a Capital Markets Day for investors in London in March.

Christmas will show whether the socks are a doorway or a substitute. If shoppers who come in for an £85 pair leave with a trench coat, Burberry has found luxury’s way back to the middle. If they stop at the socks, it has built a cheaper brand, not a recovered one.

Tags: fashion, China, Burberry, Joshua Schulman, luxury goods, retail