Burberry 2Q26 calendar-quarter performance in line with expectations; maintain Outperform

Overview

This report is Bernstein’s commentary on Burberry Group PLC’s 1Q27E trading update (corresponding to calendar 2Q26). The report believes the company’s retail performance was almost fully in line with consensus expectations, revenue was slightly above market expectations, and there were marginal improvements in both wholesale revenue guidance and FX assumptions. Bernstein maintains its Outperform rating and 1,300.00 GBp target price on Burberry.

Core views

The core view is that Burberry has completed the first stage of its brand revival, and the “Burberry Forward” strategy is effective; the key for the next stage is whether management can sustain the recovery momentum and further enhance the brand’s appeal. From an earnings perspective, comparable retail sales growth, retail revenue, performance in certain regions, and improvement across product categories all support a positive view, though regional divergence and execution risks still warrant attention.

Analysis framework

The report mainly uses a quick earnings review and consensus comparison approach, assessing Burberry’s operating trends around comparable retail sales, constant-currency revenue growth, regional performance, product-category momentum, wholesale revenue guidance, and changes in FX impact, and combines this with a relative P/E valuation framework to derive the target price.

Methodology notes

• Valuation methodsRelative P/E valuation

  1.7x relative P/E to MSCI Europe

  Bernstein applies a target P/E of 1.7x relative to MSCI Europe to its blended forward EPS forecast on an NTM+1 basis, deriving a target price of 1,300GBp.

• Performance comparisonConsensus comparison

  Results versus consensus

  The report compares Burberry’s reported comparable retail sales growth, retail revenue, and regional growth rates item by item against market consensus expectations to judge whether results beat or missed expectations.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Burberry Group PLC (BRBY.LN)

  Core covered name

  Strengths

  Comparable retail sales growth met expectations, the Americas performed strongly, outerwear achieved double-digit growth, handbags returned to growth, wholesale guidance was raised, and FX guidance improved.

  Weaknesses

  EMEIA remains in negative growth, APAC excluding Greater China was below consensus, Japan declined, and the recovery still requires sustained execution by management.

  Comparison

  Retail revenue of £455m was broadly in line with consensus of £454m; comparable retail sales of +5% were slightly above consensus expectations; performance by region diverged relative to consensus.

  Risks

  New collections may fall short of expectations, brand transformation execution may face issues, and the cost of brand revival may be higher than expected and weigh on operating leverage.

Key data

• RatingOutperformBernstein maintains its rating on Burberry.
• Target price1,300.00 GBpBased on a 1.7x relative P/E valuation.
• 1Q27E / calendar 2Q26 comparable retail sales growth+5%24 bps above consensus expectations.
• Retail revenue£455mBroadly in line with consensus of £454m.
• Constant-currency revenue growth+4%Affected by a -1% store-space impact.
• EMEIA comparable retail sales growth-3%Consensus expectation was -2.3%; excluding the Middle East, EMEIA declined -1%.
• Americas comparable retail sales growth+12%Above consensus of +10.6%.
• Greater China comparable retail sales growth+9%Close to consensus of +9.3%.
• APAC excluding Greater China comparable retail sales growth+3%Below consensus of +6.3%; South Korea +11%, Japan -2%.
• 1H27 wholesale revenue guidanceHigh-single-digit growthPreviously mid-single-digit growth, indicating positive feedback from wholesale partners.
• FY27 FX impactAbout £20m tailwind to revenue, adjusted EBIT roughly neutralPrevious guidance was about a £10m headwind to both revenue and adjusted EBIT.

Impact & implications

In terms of investment implications, the report sends a moderately positive signal: Burberry’s recovery has not materially deviated from market expectations, there are signs of improvement in products and the wholesale channel, and the FX environment is also more favorable than previously assumed. If management can sustain the brand revival and improve operating leverage, the Outperform rating is supported; however, the company currently appears to be in a recovery-validation phase rather than a full acceleration phase.

Risks

• Daniel Lee’s new collections may fall short of market expectations.
• Execution of the brand transformation may encounter problems.
• Investment in the brand revival may be higher than expected, leading to weaker-than-expected operating leverage.
• Regional performance is diverging, with EMEIA and Japan still appearing weak.

What to watch

• Management’s commentary on demand, channels, and the pace of brand revival in the upcoming conference call.
• Whether 1H27 wholesale revenue delivers high-single-digit growth.
• Whether growth in outerwear and handbags can continue and broaden into more categories.
• Whether EMEIA, APAC excluding Greater China, and the Japan market improve.
• Whether the FY27 FX tailwind continues to support revenue and profit expectations.