Burberry's 4Q26 continued to improve modestly; Bernstein keeps Outperform and a 1,500GBp target price

Overview

Bernstein comments on Burberry's fiscal 2026 fourth-quarter results, corresponding to calendar 1Q26. The report's core conclusion is that the company remains on a path of modest improvement: the top line was broadly in line with expectations but showed clear regional divergence, while profitability came in better than expected thanks to improved sales quality and the recovery following the FY25 inventory reset.

Core views

Burberry's 4Q26 comparable retail sales grew 5%, in line with consensus. EMEIA at -2% and APAC excluding Greater China at +3% were below market expectations, mainly due to weaker tourist traffic and the war in the Middle East; the Americas and Greater China were both +10% and accelerated sequentially, offsetting the weaker regions. On profitability, FY26 gross margin and adjusted EBIT margin both exceeded expectations, indicating that brand recovery is driving higher-quality sales and better operating leverage.

Analysis framework

The report uses comparisons versus consensus, year-over-year and sequential trend analysis, regional breakdowns, and a valuation multiple approach to assess the quality of Burberry's recovery. The focus is on comparable retail sales, regional growth, gross margin, adjusted EBIT margin, cost savings, and FY27 management guidance.

Methodology notes

• Valuation methodsrelative p/e multiple

  Relative P/E valuation

  Bernstein applies a 1.9x target P/E multiple relative to MSCI Europe to a blended forward EPS estimate on an NTM+1 basis to derive the 1,500GBp target price.

• earnings_reviewconsensus comparison

  Comparison versus consensus

  The report compares 4Q26, 2H26, and FY26 revenue, comparable sales, gross margin, adjusted EBIT, and margin versus company-collected consensus, the prior year, and the prior period.

Asset mapping & comparison

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

• Burberry Group PLC (BRBY.LN)

  core coverage name

  Strengths

  Brand recovery is progressing, 4Q26 comparable sales were in line with expectations, growth in the Americas and Greater China was strong, and FY26 gross margin and adjusted EBIT margin beat expectations.

  Weaknesses

  EMEIA and APAC excluding Greater China were below expectations, and FY26 revenue was still slightly below consensus and down year over year.

  Comparison

  Over the past 12 months, BRBY's absolute return was about 40.6% and relative performance versus EDME was about +28.1%; however, it still lags EDME year to date.

  Risks

  Daniel Lee's new collections may fall short of expectations, the brand turnaround execution may be disrupted, and the cost of recovery may exceed expectations, leading to weaker-than-expected operating leverage.

Key data

• 4Q26 comparable retail sales+5%In line with company-collected consensus.
• 4Q26 comparable sales in the Americas+10%Above the +6% consensus, with sequential acceleration.
• 4Q26 comparable sales in Greater China+10%Above the +9% consensus, with sequential acceleration.
• FY26 gross margin67.9%Above the 66.3% consensus, up about 540 bps year over year.
• FY26 adjusted EBIT margin6.6%Above the 6.4% consensus, improving sharply from 1.1% in FY25.
• FY27 annualized operating expense savings£100mOf which £80m was achieved in FY26.
• Valuation and target price1.9x relative P/E; PT 1,500GBpBased on a target P/E multiple relative to MSCI Europe and blended forward EPS on an NTM+1 basis.

Impact & implications

The report is constructive on Burberry from an investment perspective: although the top line has not fully recovered and some regions are still weighed down by tourist traffic and geopolitical factors, strong growth in the Americas and Greater China, improved sales quality, margin recovery, and cost savings make the brand recovery path more credible. The current target price still implies about 29% upside from the closing price.

Risks

• Daniel Lee's new collections may fall short of market expectations.
• Brand turnaround execution could run into problems.
• The cost of brand recovery may be higher than expected, resulting in weaker operating leverage.
• Performance in EMEIA and APAC excluding Greater China remains soft, showing that the regional recovery is still uneven.
• Foreign exchange is expected to create about a £10m headwind to FY27 revenue and adjusted EBIT.

What to watch

• Whether FY27 revenue growth and margin expansion are achieved.
• Whether the growth momentum in the Americas and Greater China continues.
• Whether tourist traffic and geopolitical headwinds ease in EMEIA and APAC excluding Greater China.
• The pace of realization of the remaining annualized £100m operating expense savings.
• Market feedback on Daniel Lee's new collections and the quality of brand turnaround execution.