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Highlights:
- Deutsche Bank Upgrades Burberry to ‘Buy’: Analysts express optimism over Burberry’s turnaround strategy and expected sector recovery in 2025.
- Chinese Consumer Weakness Viewed as Cyclical: Deutsche predicts a rebound in Chinese luxury demand, dismissing concerns of long-term structural issues.
- Focus on Core Products: CEO Joshua Schulman’s overhaul plan aims to realign Burberry with its heritage and drive profitability.
Burberry Group PLC (LSE:BRBY) experienced a boost on Monday after Deutsche Bank upgraded the British luxury brand to a ‘buy’ rating. Analysts expressed confidence in Burberry’s potential for a significant turnaround, supported by a broader recovery in the luxury goods sector and internal strategic changes.
Deutsche Bank’s report anticipated a brighter 2025 for the luxury industry, marking an end to two years of relative underperformance compared to retail and sporting goods. Burberry’s shares climbed 1.6% to 912.8p following the upgrade.
Sector Recovery and Burberry’s Unique Position
Deutsche analysts pointed to a shift in market dynamics, suggesting that Chinese consumer weakness, a key headwind for luxury brands, was more likely to be cyclical than structural. With China’s market representing a substantial portion of global luxury demand, a rebound in this sector is expected to benefit Burberry significantly.
Furthermore, potential tariff concerns linked to the policies of incoming US President Donald Trump are deemed less impactful for the luxury sector compared to other industries. This relatively shielded position provides Burberry an opportunity to strengthen its foothold in key markets.
A Strategic Overhaul Under Schulman
Burberry’s recently announced turnaround strategy, spearheaded by CEO Joshua Schulman, underscores the company’s commitment to reinvigorating its heritage. The plan involves a return to core products, reducing losses, and re-establishing the brand as a leading player in the luxury sector.
Last month, the company outlined its roadmap to refocus on its iconic trench coats, leather goods, and other staple products. By leaning into its strengths and refining its offerings, Burberry aims to position itself for sustainable growth and profitability.
Deutsche Bank’s Optimistic Outlook
Citing Burberry as a “credible luxury turnaround story,” Deutsche Bank highlighted the potential for robust earnings growth and a transformation in investor perception. Analysts noted that the company’s efforts could yield considerable momentum in earnings, further elevating its status within the luxury, sportswear, and apparel sectors.
Burberry was added to Deutsche Bank’s list of “most preferred” stocks in the luxury category, reflecting heightened confidence in the company’s prospects.
Market Reaction and Strategic Implications
The market responded positively to the upgrade, with Burberry’s shares rising in early trading. This reflects growing investor confidence in the company’s strategic direction and the broader recovery of the luxury sector.
As Burberry embarks on its revitalization journey, the emphasis on core products and a disciplined approach to growth could position it as a standout player in the luxury market. With the support of improving global conditions and focused leadership, the brand is poised to regain its status as a leader in the fashion industry.
